In a world that’s constantly shifting towards a more mobile-oriented lifestyle, managing finances via your smartphone is no longer an exception but a rule. Technology has allowed us to manage, save, invest, and even loan money, all at the tip of our fingers. And that’s where the coinage ‘mobile loan app’ comes into play.
But when it comes to decoding the interest rates these apps charge, things can seem a bit blurry. Therefore, this guide aims to give you a close-up of the typical interest rates that mobile loan apps charge.
The Correlation Between Mobile Loans And Interest Rates
Before we jump right in, it’s necessary to establish an understanding of the two terms we’re dealing with – ‘mobile loans’ and ‘interest rates.’
Mobile loans leverage advanced algorithms to approve quick, unsecured credit to users. All the processing from loan application to cash disbursement happens digitally via an app.
On the other hand, the interest rate is the price borrowers pay for using the lender’s money. It’s often denoted as a percentage of the principal amount.
Unraveling The Interest Rates
As you dive into the world of mobile loan app interest, ‘interest rate’ is a term you’ll frequently encounter. It ranges vastly depending on numerous factors such as loan tenure, your credit score, and even the app’s policies.
A sharp difference you may detect between traditional bank loans and digital app loans is in the interest charged. While your bank may levy interest rates within the range of 7% to 14% per annum, mobile loan apps may offer equivalent monthly rates instead. Therefore, at first glance, a rate of 2-4% per month may seem low. But do the math, and you’re looking at an annual rate of 24%-48%.
It’s important to bear in mind that the convenience of quick loans and shorter approval times often mirrors in increased interest rates.
Factors That Influence Your Rate
Having understood the typical mobile loan app interest rates, let’s talk about the variables that help shape these rates.
- Credit Score: The better your credit score, the lower will be the interest rate offered to you. It’s because a high score indicates lower credit risk.
- Loan Amount: Sometimes, borrowing a larger amount may help lower your rates due to the reduced perceived risk for lenders.
- Loan Tenure: A lengthier tenure can sometimes mean higher interest rates as the total payable interest increases.
- App Policies: Some apps might have their specific policies, which may lead to a variance in rates from one app to another.
While it’s almost effortless to borrow money from mobile loan apps, understanding the interest rate landscape isn’t as simple. So, the next time you choose a mobile loan app, ensure to evaluate and contrast the interest rates.