All Banks & NBFC Personal Loan Interest Rate

There are two types of interest rates applicable on a personal loan:

• Fixed Rate of Interest: As the name suggests, under a fixed rate of interest, the rate of interest and the amount of EMI remains constant throughout the tenure. While the borrowers can easily plan their budget for the long term, fixed rates personal loan rates are generally 1%-2% higher than the floating rate of interest.
• Floating Rate of Interest: Under the floating rate of interest, the personal loan rates are linked to internal benchmarks of the lending institutions and do not remain the same throughout the loan tenure. As a result, there is either a change in loan tenure or increase/decrease in EMI amount of personal loan.

The personal loan rates can be calculated using two methods as mentioned below

• Flat Rate: The interest is charged on the principal amount borrowed at the beginning of the loan tenure. For instance, if you have borrowed ₹ 2 Lakh & paid 1 EMI of ₹ 2,000, then in the 2nd EMI, the interest would be charged on ₹ 2 Lakh amount only.
• Reducing Balance Method: Under the reducing balance method, the applicable rate of interest is charged on the outstanding balance of the loan amount. For instance, if you have borrowed ₹ 2 Lakh & paid 1 EMI of ₹ 2,000, out of which ₹ 500 was principal amount and ₹ 1,500 was in interest amount, then in the 2nd EMI, the interest would be charged on ₹ 1,99,500.

The mathematical formula for personal loan interest calculation is as follows:

• Flat Rate Method: Interest is calculated on the entire principal amount
  EMI = (Principal + total interest payable) / loan tenor in month
  Where Total Interest Payable = Principal x Interest Rate x Loan Tenure/100)
• Reducing Balance Method: Interest is calculated on the outstanding principal amount
  EMI= [P x R x (1+R)^N]/[(1+R)^ (N-1)]
  Where P = Principal Amount
  R = Rate of Interest
  N = Loan Tenure in months

Banks provide low-interest personal loans for specific applicants, as mentioned below:

• Personal Loan for Salaried:Salaried individuals working in government, private or MNC companies can avail a personal loan. Personal Loan to self-employed non-professionals is known as a business loan. Typically, Salaried customers working in a reputed organisation have more chances to get a personal loan at lower rates.
• Personal Loan for Women:Various banks & lending institutions also provide concessional personal loan rates to women to help them become financially stable and fulfil their personal and business needs.
• Personal Loan for Government Employees: Banks like SBI, HDFC & ICICI Bank also offer special personal loan schemes for government employees for meeting medical emergency, wedding or family vacation expenses. The personal loan rates for government employees start at 11.49%.
• Personal Loan for Pensioners: You can also get a pension loan for pensioners at attractive interest rates and no hidden costs from banks like SBI, PNB, Bank of India etc. SBI personal loans for pensioners do not charge any processing fees for defence pensioners.

You can get the best personal loan depending upon the company you are working with, the loan amount you have applied for and your repayment capacity. Here are salient points that you must remember to get the lowest personal loan rates:

• Don’t apply for a personal loan with multiple lenders as it impacts your credit score and eventually also reduces your chances of approval of loans at lower rates.
• Before applying for a personal loan, you must check your personal loan eligibility as applying for a higher loan amount may lead to rejection of loan application.
• Having a good existing relationship with the lending institutions can improve your chances of approval of loans at lower rates.
• Maintain a good low credit utilisation ratio and low FOIR to get the lowest interest rate on personal loan.
• Finally, lending institutions provide the lowest rate of personal loans for specific tenures. So, if possible, opt for tenures with the lowest rate.

Here are some factors that affect personal loan rates:

• Debt to Income Ratio: It is the amount of existing debt you have compared to your gross income. Lower your ratio, better the rates you will get.
• Loan Term & Amount: Longer-term loans usually have higher rates than a shorter loan. Also, lenders may charge a higher interest rate on a lower loan amount.
• Your Credit Score: Lender may only approve your Loan and that at a significantly high-interest rate, if you have a credit score of less than 700.
• Organisation Type: Working with a reputed employer means you are eligible for lower interest rates.
• Relationship with the bank: If you have a good existing relationship with the lending institutions, then they may approve loans at lower personal loan rates.

To decide about the best bank for a personal loan make a detailed comparison of different banks on various parameters like current interest rates, charges like processing fees, prepayment charges, lending process, documents required and customer service of banks regularly.

• Personal Loan Rates: You can get the low interest personal loans depending upon the company you are working with, the loan amount you have applied for and your repayment capacity. Before applying for the loan, compare personal loan rates of different lending institutions to get the best personal loan rates.
• Processing Fees:Along with personal loan rates, you should also check the lending institutions’ processing fees. Generally, banks levy processing fees up to 2% of the loan amount.
• Prepayment & Foreclosure Charges: Banks typically levy prepayment or foreclosure charges on loans ranging from nil to up to 5%. So, check carefully if the low-interest rate personal loan you are getting comes with high prepayment or foreclosure charges. You must also consider other terms and conditions such as the period for such payments as some banks may allow you to repay your loan before the loan tenure only after the specific tenure.
• Eligibility Criteria: It is also significant to check your personal loan eligibility before applying for a personal loan as applying for a higher loan amount can lead to rejection of loan application. You can use an online personal loan eligibility calculator to determine your loan eligibility.
• Loan Disbursal Time: While the process of sanctioning of Loan through offline mode may take some time, however, you can avail a personal loan online instantly in a few hours. The process of disbursal of Loan through personal loan apps is even faster. Thus, you must certainly consider the time for disbursal of loans, especially if you are looking for a personal loan in case of an emergency.
• Customer Service: If you wish to have a good borrowing experience, you must also read about online reviews regarding lenders’ customer service so that you can identify how prompt are lending institutions in assisting as and when required.
• Offers: Applying for a personal loan online with an online marketplace like MyLoanCare can help you get attractive cashback offers on your Personal Loan. Thus, you must also consider this before availing a personal loan.

✅Which bank is best for personal loans?

PNB, SBI, Kotak Bank, Yes Bank, Axis Bank, IndusInd Bank, IDFC First Bank, HDFC Bank, Bank of Baroda, are the best banks for a personal loan if you are looking for an instant personal loan within 1-2 days as they offer an online lending process. The bank loan interest rates are in the range of 10.40% to 10.65%.

✅What is the current Lowest interest rate for personal loans?

As per the current rates, Yes Bank offers the lowest interest rate of 10.40%.

✅Can I get a low rate of interest even if my credit score is bad?

Adding a co-applicant with good credit score and income level can improve your chances of getting approval for low-interest rate personal loan.

✅Should I always choose the lowest available interest rate?

No, along with lower interest rates, you must also consider other charges such as processing fees, prepayment & foreclosure charges, disbursal time etc. before choosing the lender for a personal loan.

✅Which one provides a personal loan at a lower rate of interest – Govt. Bank, Private Banks or NBFCs?

Generally, banks may offer personal loans at a lower interest rate; however, they have stricter loan eligibility criteria.

✅What is a good interest rate on a personal loan?

A good interest rate on a personal loan is lower than the national average. As per the current rates, Yes Bank offers the lowest interest on personal Loan at 10.40% and can be considered a good rate on a personal loan.

✅What are some of the other fees and charges levied by lenders?

Along with personal loan rates lending institutions levy charges such as processing fees, legal & technical charges, prepayment & foreclosure charges on a personal loan.

✅Can banks change the interest rate during the loan tenure?

Under the floating rate of interest, the personal loan rates are linked to the lending institutions’ internal benchmarks and do not remain the same throughout the loan tenure.

✅How does balance transfer help you get a lower interest rate?

Switching to another lender may help you get a lower interest rate; however, you must calculate the balance transfer fees. Also, negotiating with the existing bank if your income level or credit score has improved can help you get a lower interest rate.