Apply for personal loan with interest rate starting from 10% p.a. in India. Some of the factors that affect the interest rates include your income, loan amount, employment status, credit score, repayment capacity, loan tenure and relationship with the lender.
Personal Loan Interest Rate by Banks
Personal Loan Rates & Charges
Last Updated : 2 March 2020
|Fee||Amount to be Paid|
|Interest Rate||10% – 36% p.a.|
|Processing Fee||Nil to 6.5% of loan amount|
|Loan Tenure||1 to 5 years|
|Lowest EMI Per Lakh||Rs. 2,125 for 5 years|
|Prepayment Charges||Nil to 6%|
Lenders also charge a processing fee ranging from Nil to 6.5% of the loan amount and the tenure from 1 to 5 years. The other charges involved include the documentation fee, prepayment charges, pre-closure fee, late payment fee, etc.
- 100% paperless approval available for loans from Tata Capital, HDFC Bank, and Kotak Mahindra Bank
- Zero processing fee offers by Citibank, Tata Capital and IndusInd Bank,
- Instant approval within 10 Seconds from HDFC and ICICI Bank
- No foreclosure fee charged by Axis Bank, Bank of India, and Corporation Bank
Factors that Affect Personal Loan Interest Rates
- Your credit score serves as an indicator of your repayment capacity and creditworthiness. Thus, if you have a high credit score, you will be a charged a lower interest rate, and vice versa. A credit score of 750 and above is considered good by loan providers.
- Loan providers take the applicant’s income into account when deciding the interest rate. Individuals who have a high income pose a lower risk to the bank and, thus, might be offered a lower rate of interest. On the other hand, those with lower annual incomes may have to pay a higher interest rate.
- If you work for a reputed organisation, the bank/financial institution is more likely to offer you a lower rate of interest.
- Loan providers may offer different interest rates to applicants based on whether they are self-employed or salaried.
- The age of the applicant can also have an impact on the interest rate quoted by the loan provider. Individuals who are nearing the retirement age may be charged a higher interest rate.
- Existing customers of the bank/financial institution may be offered a lower rate of interest at the time of applying for a personal loan, provided they have a good relationship with the loan provider. This is, however, at the discretion of the bank and not all existing customers will be offered a preferential interest rate.
Among the various points that are mentioned above, the credit score of an applicant is one of the primary factors that is taken into account by banks and financial institutions to decide the interest rate. Make sure to check your credit score at the earliest to ensure that you are offered a favorable interest rate.
|CIBIL Ratings||Credit Score||Chances of Being Approved for a Personal Loan|
|Poor||Less than 600||You may not qualify for a loan|
|Average||Between 600 and 750||Loan may be approved, but at a high interest rate|
|Good||Over 750||Loan is likely to be approved with a lower interest rate|
|Excellent||Between 800 and 900||Loan with a low interest rate, faster approval, larger loan amount|
How to Get Lowest Interest Rate for Personal Loan
If you are looking to apply for a personal loan, here are a few tips that will help you avail a lower rate of interest:
- : A high credit score indicates that you are creditworthy. Banks and financial institutions offers lowest interest rates to applicants who have a high credit score. Thus, you should check your credit score before applying for a personal loan. If your credit score is lesser than 750, you should look for ways to improve it. There are more chances of you getting a personal loan at a low interest if your credit score is over 750.
- : If you miss a loan or credit card repayment, your credit score may be adversely affected. Loan providers usually take your repayment history into account before deciding the rate of interest for a loan. Those who have paid their past EMIs and credit card bills on time are likely to be charged a lower interest.
- : Banks and financial institutions usually offer special interest rates for a limited period of time during festive occasions. If you apply for a loan while such an offer is running, you may be offered a lower rate of interest.
- : Before applying to a particular bank for a personal loan, it is necessary to compare the interest rates charged by various NBFCs and banks. This will help you avail a personal loan at a competitive interest rate.
- : If you are an existing customer of a bank or have a good relationship with the loan provider, you can negotiate for a lowest interest rate. When doing this, it is advisable to submit a formal written request to the loan provider.
Things to Consider
While selecting a personal loan with a low interest rate, there are a few other things that you should consider:
- Processing Fee: Loan providers levy a one-time charge known as the processing fee, which can increase the cost of the loan. Even if you are charged a low interest, it is important to check and compare the processing fee charged by different lenders.
- Pre-Closure Charges: Certain banks may charge you a pre-closure fee if you repay the outstanding loan balance before the completion of the loan repayment tenure. Make sure to check if the bank/financial institution that you are applying to levies a pre-closure charge.
- Customer Service: In order to have a good borrowing experience, it is necessary to apply to a lender that offers good customer service. Before submitting your loan application, you should check the customer care channels that are available and how prompt the lender is in providing you assistance when required.
- Eligibility Criteria: While the bank or financial institution may offer personal loans at low interest rates, you should make it a point to check if you meet the eligibility criteria specified by the lender. To this end, you should ensure that you check if your income meets the set limit and if you meet the age requirements specified.
- Loan Disbursal Time: If you are looking to take a personal loan due to an emergency, it is important to take the loan disbursal time into account. A number of leading banks and financial institutions disburse the loan amount within a matter of seconds.
- Other Charges: While the lender may charge you a slightly higher interest rate, you may be able to save on the overall cost of the loan if the processing fee, default charges, pre-payment fee, Loan Cancellation Charges, Check/EMI bounce charges, Instrument return charges, Stamp Duty Charges, Duplicate statement issuance charges, swap charges, Duplicate Amortization schedule issuance charges, etc., are low. Thus, make sure you compare the various charges levied by the lender before applying for a personal loan.
- Discounts: Although the bank/financial institution may have specified a high interest rate, you can try to negotiate with the bank for a lowest interest rate. Many-a-times, lenders will give a discount to existing customers and to those who have maintained a healthy relationship with them.
- Special Offers: Certain lenders may charge you a lower interest rate during festive occasions.
*Some loan providers do charge a comparatively higher interest rate; however, you should take certain other factors into account before making a decision.
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Fixed Interest Rates vs Floating Interest Rates – Which is better?
If you opt for a personal loan with a fixed interest rate, you will be charged the same rate of interest throughout the loan repayment period. On the other hand, the floating or variable interest rate is linked to the Marginal Cost of Lending Rate or the MCLR, thus causing the interest rate to fluctuate as and when the MCLR changes.
The benefit of opting for a fixed interest rate is that you know exactly how much you will be charged during the loan tenure. Thus, those who wish to plan their finances in advance can opt for a fixed interest rate. If you, however, don’t mind a fluctuating interest rate, you can opt for a floating/variable interest rate. The benefit of opting for a variable interest rate is that your repayment amount will reduce when the interest rate is low.
What is meant by Reducing Interest Rate with regard to Personal Loan?
When you avail a personal loan at a flat interest rate, the interest is calculated on the entire loan amount throughout the loan repayment period. In comparison, if you avail a loan at a reducing interest rate/reducing balance rate structure, the interest is only calculated on the outstanding loan amount. Thus, in this case, when you make a monthly repayment, the interest for the remainder of the loan tenure will be calculated on the outstanding loan balance.
How to Calculate EMI on Your Personal Loan
The interest rate that you will have to pay when applying for a personal loan may vary based on a number of factors. The applicable interest rates are usually specified on the official websites of banks and other financial institutions. You can also check the interest rates offered by different banks through a third-party financial services website.
The interest rate charged by the loan provider has an impact on the EMI that you will have to pay once your loan is disbursed. Thus, before you apply for a personal loan, it is advisable to use the personal loan EMI calculator tool to know the payable EMI.
To use the EMI calculator tool, you will simply have to navigate to the respective website, after which you will be required to input certain details such as your desired loan amount, the tenure of the loan repayment period, and the interest charged. Once you key in the required details, the total EMI that you will need to pay on a monthly basis will be displayed. You will find the EMI calculator tool on the websites of banks/financial institutions and on third-party financial services websites.
Formula to Calculate Personal Loan EMI
EMI = [PxRX(1+R)^N]/[(1+R)^N-1], wherein P represents the loan amount, R is the interest rate charged per month, and N indicates the total number of monthly installments.
Mr. Mehta, a 33-year old IT engineer, is looking to apply for a personal loan to pay for his wedding expenses. He intends to apply for a loan of Rs.10 lakh and repay the loan over a period of 36 months. He expects to pay an interest of 14% p.a. for the loan.
To calculate the EMI for the personal loan, he will need to navigate to either a bank/NBFC’s website or a third-party website that offers an EMI calculator tool. He will then have to input the loan amount, which is Rs.10 lakh, the loan tenure, which is 36 months, and the interest rate, which is 14% p.a.
Upon entering these details, the EMI payable, which is Rs.34,177.63 per month, will be displayed. In his case, the total payable interest is Rs.2,30,394.67, while the total payable amount is Rs.12,30,394.67.
The interest rate that applies on your personal loan is an important factor. In this page, we’ve put together some of the questions borrowers usually ask regarding their personal loan interest rates.
Banks like HSBC and ICICI offer personal loans at attractive rates starting from 10.50% p.a. However, the interest rate may vary from customer to customer depending on certain factors, customer’s including credit profile and relationship with the bank, to name a few.
Your income denotes your capacity to repay a loan. A higher income shows that you have a better financial bandwidth to repay the loan on time. This means that your risk level is low. Lenders prefer individuals with low risk profiles and may hence offer you a lower interest rate.
Working with reputed companies means that you are more likely to have a stable job and income. Your work experience shows work stability as well. This reflects on your loan rate.
A good credit score indicates that you are responsible in handling your finances. This keeps your risk rating low. If your credit score is 750 and above, most likely you will be offered preferential rates.
When processing your loan application, lenders will look at how much debt you currently have. If you’re spending most of your current income to repay existing loans, they may not grant you a personal loan. Even if they do, they will charge you a high rate of interest.
If you have a credit score, preferably above, 750 and are in good terms with the concerned lender, you might get preferential rates. Also, working in a reputed company and having a good credit profile may fetch you better rates.
Yes, you may be able to get an interest rate lower than what is advertised by the lender. This is where negotiation plays a vital role. If you’re able to negotiate well with the lender, you may be able to get a good rate.
Yes, you may be able to get a loan with an affordable rate even if your credit is bad. You can try and get a good rate by getting a co-applicant with good credit to apply along with you. Another way is to get a guarantor with good credit to back you up.
Offering collateral is another way to get an affordable rate of interest. Your rate is determined based on your risk level. Offering collateral reduces your risk level significantly as it serves as security against non-repayment. But do keep in mind that if you fail to repay the loan on time, the lender might take over your collateral.
Having an existing relationship with a bank or lender is always beneficial. If you have a good relationship with your current banker, you’re likely to get better loan terms. For example, you may get a rate of interest better than what most others get.
The interest on the loan denotes the cost of your borrowing. Hence, it is always better to opt for the lowest interest rate available in the market when you’re applying for the loan. But keep an eye out for other charges levied by your lender.
Apart from your loan rate, there are a few other charges that form a part of your cost. These include the following:
- Processing charges – for processing your application
- Verification charges – for verifying your background and other parameters
- Government taxes – for example, GST
- Late payment fees – if you don’t pay your EMIs on time
- Prepayment fees – if you want to prepay a part of your loan
- Foreclosure fees – if you want to close your loan ahead of schedule
Different lenders charge varying processing fees. This is calculated either as a percentage of the loan amount you apply for or is a fixed fee set by the lender.
The prepayment fee is usually calculated in two ways:
- As a percentage of the amount you want to prepay, or
- As a percentage of the principal amount outstanding at the time of prepayment.
Some lenders may charge you a fixed fee for this facility.
The only way you can avoid paying this fee is if your lender waives it off or doesn’t charge you for making prepayments.
This depends on whether you can make up for paying the fee. Prepaying your loan will help you save on interest costs. Prepayments reduce your outstanding principal, which in turn, reduces the interest cost. Compare and see if the prepayment charges are lower than the interest amount you save. If yes, then it makes sense to prepay and terminate your loan faster.
Your lender will charge you a late payment fee if you fail to pay your EMI on time. This fee will be mentioned in your loan document. Apart from this, you may also have to pay a penalty for late payment.
If you opt for a personal loan with a fixed interest rate, there will be no changes to the interest rate during the loan tenure. If you opt for a floating interest, the bank may change the interest rate when the MCLR changes.
You can opt for a fixed interest rate or floating interest rate, based on the options that are provided by the lender.
While the EMI is an important factor to take into account, you should also consider other factors such as the processing fee, tenure of the loan, interest rate charged, repayment options, reliability of the loan provider, etc., when applying for a personal loan.
Banks will change the variable/floating interest rate each time the Repo-linked Lending Rate (RLLR) changes, as and when decided by RBI.
Most banks charge interest rates between 10.50% to 24% p.a. for personal loans. The interest rate that you are charged will vary based on a number of factors such as your credit score, your income, the company that you are employed with, your age at the time of applying for the loan, etc. Thus, make sure to compare interest rates of different loan providers before applying for a personal loan.
In the case of monthly reducing loans, the principal amount gets reduced each time you pay an EMI and the interest will only be calculated on the outstanding balance. In the case of daily reducing loans, the principal gets reduced on a daily basis and the interest is charged on whatever balance is outstanding. You, being the borrower, stand to benefit if you opt for a monthly/daily reducing personal loan since the overall interest that you will have to pay will be lesser.
If you currently have a good relationship with a loan provider, i.e. you are an existing customer of the bank/NBFC or you have availed a loan in the past for which all repayments were done as per schedule, you may be offered a preferential interest rate. However, this does not mean that all existing customers who apply for a personal loan will be offered a discounted interest rate.
Balance transfer is a process by which the borrower transfers their outstanding loan balance from their current loan provider to a new loan provider. The primary benefit of doing this is that you can transfer the outstanding loan amount to a bank/financial institution that offers a lower interest rate, thereby reducing the overall interest that you will have to pay during the loan tenure.