In the current economy, professionals like doctors, Chartered Accountants (CAs), or lawyers with private practices possess an immense opportunity for growth. However, they also require large amounts of funding to tap into these opportunities.

Here, professional loans become a handy tool to access in order to start your practice or expand them. Many lenders also provide tailor-made professional loans for doctors, CAs, etc, that allow them easier access to credit.

However, the cost of your professional loan depends on the interest rate offered by a particular lender. Before applying for these loans, take note that there are various factors that influence these rates. 

Read on to learn more about the prevailing professional loan interest rates and what may impact them and, subsequently, your cost of borrowing.

Professional Loan Interest Rates

There are various lenders that provide professional loans, and the interest rates that they offer vary. However, professional loan interest rates usually range between 10%-20% p.a. 

The interest rates also depend on various factors, including your credit history, income, profits, and repayment capacity. Note that the cost of borrowing a loan would be lower if you choose a lender offering lower rates.

So, it is prudent to thoroughly research the rates offered by different lenders on professions. For more details about the professional loan interest rates offered by some of the reputed lenders, refer to the table below:  

Factors that Impact Professional Loan Interest Rates

While most lenders offer professional loans at lower rates, there are some factors that lenders consider to set these rates. The better your standing as per these criteria, the higher the chances to avail of professional loans at lower rates.

The following are some of the major factors influencing the decision of banks and NBFCs regarding the professional loan interest rates offered to you:

Credit Score and Repayment History

Maintaining a good credit score, usually over 700, makes you eligible for competitive professional loan interest rates. Your credit score is based on your credit report, which highlights your repayment history. 

A stellar repayment track record also builds confidence in banks and NBFCs to offer you loans at lower rates. However, if your repayment history has irregularities, it is likely that lenders will offer you higher professional loan interest rates. 

Ability to Repay the Loan 

An applicant’s ability to repay the loan also plays an important loan for the lenders in deciding the interest rates. For this purpose, they generally use two metrics: your income and the debt-income ratio.

Lending to higher income-level individuals guarantees banks to involve a lower risk of default. Because of their stronger financial health, such individuals are more likely to pay their dues on time as compared to those with lower incomes. 

In addition, banks and NBFCs also assess your debt-income ratio before offering you a loan. This is simply a ratio of your current debts to your current income. Even if you have a high income but if most of it goes into debt repayment, lenders may not offer lower rates.

Relationship with the Lender

Banks also consider your relationship with them when deciding on interest rates for any loan. They may offer you more favourable personal loan interest rates if you have a loyal and long-term relationship with them.

For instance, if you already hold deposits in savings or an investment account with the bank, you may be regarded as a trusted customer. This may open doors for specialised professional loans, at more competitive rates, based on your history. 

These loans grant access to funding at favourable interest rates when compared to personal loans, making them an ideal lending option for many professionals. What makes them more attractive is the higher amounts available to borrowers, subject to the fulfilment of certain conditions. 

Each lender separately sets the minimum and maximum amount available to you as a professional loan. However, lenders understand that professionals generally need higher funding to manage business-related needs. Hence, the amounts sanctioned under these loans are generally enough to help doctors, CAs, lawyers, etc., to fulfil their financial requirements.

Not just that, these loans also come with lower processing fees, total costs, and flexible tenures. So, be sure to compare all your options and pick one that has cost-effective terms and a suite of features.