There are two types of interest rates to consider while taking personal loans – simple and compound interest. Interest is an additional charge levied on the principal loan amount. So, borrow money wisely that you can repay easily, even with the interest rate charged. While technology has altered the way loans are being disbursed, some factors that affect your interest, such as type of interest rate, credit scores, down payment, and loan type. The kind of interest rate you choose becomes very important for balancing your budget and financial plans. Variable Interest Rate is a kind of interest rate which is floating and keeps fluctuating according to the market value.It is an unchanging interest rate that remains stable throughout the loan tenure. Fixed Interest Rate remains constant and does not change on a loan or debt.Further, the interest rate is applied to the newly derived principal amount. Compound Interest Rate gets added to the principal loan amount.It is generally applied to short-term loans. Simple Interest Rate is only intended on the principal amount of borrowed money.Easy calculation of the interest and EMIs gave borrowers the confidence of applying for personal loans with clarity on the monthly amount payable. Since the interest rate calculator was introduced online, the availing of personal loans became simpler. It often gave inaccurate results and kept borrowers in a fix whether to go ahead with a personal loan or not. Earlier when interest rate calculators did not exist, doing manual calculations was the only option.
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