Loan interest rate: Concept, calculation and secret to low interest rate loan

One of the most popular forms of loan is unsecured loan, thanks to its quick procedure and no need for collateral. However,unsecured loan interest ratesInterest rate is always the most important factor because it directly affects the monthly payment and the total cost of the loan. Understanding the calculation and factors that affect interest rates will help borrowers make smarter and more effective financial decisions.

Quick summary:

• Unsecured loan interest rate is the interest rate a borrower must pay for an unsecured loan, based on personal reputation, income and credit history.
• There are types of interest rates including fixed interest rates, floating interest rates, and preferential interest rates.
• Calculate unsecured loan interest rate according to the original balance or decreasing balance formula.
• Customers can register for online loans with SeABank right on SeANet/SeAMobile or go to transaction counters for support.

1. What is the unsecured loan interest rate?

1.1. Concept

The unsecured loan interest rate is the interest rate that the borrower must pay for a loan without collateral, based on personal reputation, income and credit history. Normally, the unsecured loan limit ranges from 10 to 500 million VND, depending on the income, work unit and credit score of the borrower.

Compared to mortgage loans, unsecured loans have many outstanding advantages. First of all, borrowers do not need collateral, making the loan process faster and more flexible. Simple procedures, easy-to-prepare documents, review and disbursement time usually only takes a few hours to a few days.

In addition, this form of loan is suitable for people who do not have large assets such as houses, cars or red books but still need to borrow for consumption, study or small business. However, because there is no collateral, the interest rate of unsecured loans is often higher and the loan limit is lower than that of mortgage loans.

1.2. Interest rate classification

In unsecured loans, interest rates are divided into many different types depending on the policy of the bank or financial company. Each type of interest rate has its own characteristics and risk level, directly affecting the amount the borrower must pay. Specifically including:

• Fixed interest rate: The interest rate remains the same throughout the loan term, making it easy for borrowers to plan their finances.
• Floating interest rate: Interest rates may change periodically (usually every 3 or 6 months) according to market fluctuations or the bank's base interest rate.
• Preferential interest rate: A lower interest rate than normal, applied for an initial period (usually 3–12 months) to attract borrowers, then switching to a floating interest rate.

1.3. Conditions for unsecured loans

To be approved for a consumer loan, customers need to meet a number of requirements.basic conditionsas prescribed by the bank or finance company. Specifically:

• Age: Usually from 20 to 60 years old (some places accept up to 65 years old if still have stable income).
• Nationality and residence:Be a Vietnamese citizen, have a valid ID card/CCCD and a clear residential address.
• Stable income: Have monthly incomefrom salary, business or other legitimate sources to ensure debt repayment ability.
• Good credit history: No bad debt on CIC, not listed on credit warning list.
• Required documents: ID card/CCCD, household registration book or temporary residence certificate, labor contract or salary statement (for employees), or business registration certificate (for business households).

2. Common ways to calculate unsecured loan interest rates

The interest rate of unsecured loans ranges from 14% to 28% per year, depending on the type of loan and the creditworthiness of the customer. Currently, there are two common ways to calculate interest: based on the initial balance and based on the decreasing balance.

2.1. Calculation method based on initial balance

The method of calculating the interest rate on a personal loan based on the initial balance is a form in which the interest is calculated based on the entire original principal amount throughout the loan period, not decreasing according to the amount paid. That means that even if the borrower has paid a part of the principal, the monthly interest is still calculated as the original, making the total cost of the loan often higher than the method of calculating according to the decreasing balance.

For example:
Mr. A borrowed 100,000,000 VND for 12 months with an interest rate of 18%/year (ie 1.5%/month).

• Monthly interest = 100,000,000 × 1.5% = 1,500,000 VND
• Monthly principal = 100,000,000 / 12 = 8,333,333 VND
• Total monthly payment = 8,333,333 + 1,500,000 = 9,833,333 VND

With the initial balance method, the interest does not change throughout the loan term, so the total monthly payment is fixed, but in reality the borrowing cost is higher than with the decreasing balance method.

2.2. Calculation method based on decreasing balance

The method of calculating interest on a personal loan based on a decreasing balance is a method in which interest is calculated on the remaining principal balance after each payment period. That is, each time the borrower pays a portion of the principal, the interest for the next period will decrease accordingly, making the total actual cost of the loan lower than the method of calculating based on the initial balance.

For example:
Ms. B borrowed 100,000,000 VND for 12 months with an interest rate of 18%/year (equivalent to 1.5%/month).

• First month: Interest = 100,000,000 × 1.5% = 1,500,000 VND
• After paying the principal of VND 8,333,333, the remaining debt is VND 91,666,667.
• Second month: Interest = 91,666,667 × 1.5% = 1,375,000 VND

This way, the interest decreases each month, helping the total amount payable also decrease over time.

Note: You should ask your bank staff clearly about the interest calculation method applied to your loan to avoid confusion between the two forms, as different calculation methods can significantly affect the total cost of the loan.

3. Factors affecting unsecured loan interest rates

The interest rate on unsecured loans is not fixed but depends on many different factors, from personal reputation to bank policies. Below are the main factors that affect the interest rate that customers have to pay:

• Creditworthiness (credit history): This is the most important factor. People with good credit history and no bad debt on CIC will be highly appreciated by the bank and enjoy more preferential loan interest rates.
• Income: Banks base their determination of repayment ability on monthly income. The higher and more stable the income, the lower the interest rate.
• Occupation and place of work: Highly stable professions such as civil servants, teachers, bank employees, etc. are often given priority with lower interest rates.
• Each bank's policy: Each bank or financial company has its own lending policy and interest rate, depending on its strategy and target customer group.
• Loan time: Interest rates may change according to the macroeconomic situation, the State's monetary policy or the bank's promotional program in each period.

4. 5+ Tips for low interest rate unsecured loans

To enjoy low interest rates on unsecured loans, borrowers not only need to have a good profile but also need to be well prepared and negotiate smartly. Here are some useful tips to help you optimize your loan costs:

• Maintain good credit history: Always pay your credit cards and loans on time to avoid bad debt being recorded on CIC. A clean credit record helps you easily get approved for loans with preferential interest rates.
• Prepare complete documents: Providing clear personal documents, transparent proof of income and specific workplace information will help increase credibility, thereby reducing loan interest rates.
• Research and compare many places: Each bank or financial company has different interest rate policies, so you should compare carefully before deciding to borrow to choose the place with the best conditions.
• Interest rate negotiation: If you have a high income, a good credit history or are a loyal customer, don't be afraid to ask the bank to lower your interest rate or waive service fees.
• Be careful with “0% interest” ads: These programs often come with hidden costs such as application fees, administration fees, or loan insurance. Read the contract carefully to understand the actual total cost.

5. Consumer loans with simple procedures and attractive interest rates at SeABank

SeABank currently offers unsecured loan packages for individual customers with competitive interest rates, quick procedures and high loan limits. Customers can borrow for consumption, small business, study abroad or personal shopping without collateral.

Outstanding advantages when borrowing unsecured loans at SeABank

• No collateral required: Customers can borrow money without having to bring their house, car or large assets as collateral. SeABank reviews based on personal reputation, income and credit history. 
• Diverse loan packages: Loans for animal feed dealer chains, unsecured business loans, consumer loans, loans for members of the Vietnam Women's Union, loans for teachers, civil servants, public employees, overdraft loans,...
• High and flexible loan limit: Loan packages such as SeABuy consumer loans have a limit of up to 500 million VND. SeABank also allows customers to borrow unsecured loans up to about 6 times their income, up to a maximum of 300 million VND in some packages.
• Long and flexible loan terms: Loan terms can be up to 60 months (5 years) depending on the loan package. Customers can repay the debt monthly, paying principal + interest regularly, in accordance with the borrower's financial capacity.
  Simple procedures, quick disbursement: Loan application is easy to prepare, no collateral required. Approval and disbursement time is usually 1-3 working days.
• Competitive and transparent interest rates: SeABank offers unsecured loan interest rates from ~10% to 16%/year depending on the product and loan application.
• Loan procedures: Unsecured loan procedures at SeABank are considered simple and convenient, suitable for many customers.

Consumer loan interest rate is the key factor that determines the cost and benefits of borrowing money. Understanding the concept, how to calculate and knowing how to compare and negotiate with the bank will help you choose the right loan package, save costs and avoid financial risks. If you know how to manage well, unsecured loans are not only a temporary solution but also an effective support tool to help you achieve your personal financial goals in the future.

If you want to learn more about SeABank's loan packages, you can contact the nearest transaction point or call Hotline 1900 555 587 or visit the website www.seabank.com.vn for more details.