Personal Loan Interest Rates

As per the current rates, HDFC Bank, ICICI Bank offers interest rate starting at 10.25%. The lowest personal loan rates have fallen by 0.15% from the previous rates and are applicable from 20 April, 2021. You can be eligible to get personal loan best rates if you are salaried, working in a reputed company with no payment defaults and have an existing relationship with the bank. Typically, banks charge lower rates for a higher loan amount and for employees working with large and reputed companies. You can compare personal loan interest all banks to get the best rates based on your eligibility.

HDFC Bank, Tata Capital, ICICI Bank, IDFC First Bank, Axis Bank are the best banks for personal loans, if you are looking for an instant personal loan with a quick disbursal within a few hours to 1-2 days. Interest rate on instant personal loans of these top banks are in the range of 10.25% to 17.25%. Further, if you are an existing bank account holder or existing loan customer of HDFC Bank, Tata Capital, ICICI Bank, IDFC First Bank, Axis Bank, you may be eligible for an instant disbursement without the need to submit any documents for personal loans.

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 are generally 1% - 2% higher than the floating rate of interest.
• Floating Rate of Interest: Under the floating rate of interest, the 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 an increase/decrease in the EMI amount of personal loans.

Interest Rates for Different Applicants

Interest Rate for Salaried Employee

Both salaried and self-employed professionals like doctors, CAs etc can apply for a personal loan. However, the interest rates on personal loan for salaried employees are is less than that for self-employed professionals. Top banks that provide competitive rates for salaried employees is given below:

Bank	Interest Rate	Processing Fee	Maximum Loan Amount
ICICI Bank	10.25% - 22.00%	upto 2.25% of the loan amount	₹ 30 Lakh
HDFC Bank	10.25% - 22.00%	Upto 2.50% Min ₹ 999	₹ 75 Lakh
Kotak Bank	10.45% - 17.99%	Starting from Rs.999	₹ 50 Lakh
Axis Bank	10.49% - 17.25%	Rs.4,999	₹ 25 Lakh
IndusInd Bank	10.49% - 20.00%	Min 0.75% to Max 1.75%	₹ 25 Lakh
Tata Capital	10.49% - 17.99%	Upto 2.50% of Loan Amount	₹ 25 Lakh
Federal Bank	10.49% - 17.99%	0.5%, Min Rs. 500	₹ 10 Lakh
IDFC First Bank	10.49% - 22.00%	Upto 2.00%	₹ 40 Lakh

Apart from salaried individuals, self-employed professionals with a stable source of income can also apply for a personal loan. The list of top lenders providing the best personal loan interest rates for self-employed are listed as follows:

Bank	Interest Rate	Processing Fee
ICICI Bank	10.50% -10.50%	Rs. 1999
Yes Bank	10.50% -10.50%	Rs. 1499
HDFC Bank	10.85% -10.85%	Rs. 499
Bank of Baroda	11.05% -14.10%	Upto 2%, Min Rs. 1,000 and Max Rs. 10,000
Corporation Bank	11.20% -15.00%	Upto 0.75%, Min Rs. 5,000

Current Rates of Interest for Pensioners

Various government banks such as SBI and PNB provide concessional interest rates on a personal loan for pensioners with rates starting at 9.75% The best personal loan rates for salaried employee starts at 10.25% and can even be cheaper if you borrow from the same bank where you hold the pension account.

Personal Loan Rates for Women

To boost financial independence among the women in the country, many top lenders provide discounted rates to women borrowers. Leading lenders that offer special personal loan schemes for women at best rates are:

Bank	Interest Rate	Processing Fee
ICICI Bank	10.25% -22.00%	upto 2.25% of the loan amount
HDFC Bank	10.25% -22.00%	Upto 2.50% Min ₹ 999
Kotak Bank	10.45% -17.99%	Starting from Rs.999
Axis Bank	10.49% -17.25%	Rs.4,999
IndusInd Bank	10.49% -20.00%	Min 0.75% to Max 1.75%

Today, almost all top banks in India offer instant personal loans with a completely online process, quick disbursal and competitive interest rates starting at 10.25%. The best part is that you do not need to visit a branch even once to get a loan. Top lenders with instant interest rates are listed as follows:

Bank Name	Interest Rate on Instant Loans	Processing Fee
SBI	9.60% to 15.65%	Nil
HDFC Bank	10.25% to 22.00%	Upto 2.50% Min ₹ 999
ICICI Bank	10.25% to 22.00%	upto 2.25% of the loan amount
Citibank	10.99% to 18.99%	Upto 0.5%
Bajaj Finserv	12.99% to 15.50%	Starting from 1.50%, Up to 3%

In case you are paying high interest to the current lender, you may switch the lender without closing the loan through the personal loan balance transfer facility.

Illustration: Suppose you have an outstanding balance on a personal loan of ₹ 5,00,000 at an interest rate of 15% for a remaining tenure of 3 years. In that case, your monthly EMI would be ₹ 17,333 with a total interest payout of ₹ 1.24 Lakh. However, if you plan to switch to lender B who provides an interest rate of 12%, then your monthly EMI would be ₹ 16,607 on the outstanding balance of ₹ 5,00,000. Consider the table below to understand the same further:

Parameters	Existing Loan	Balance Transfer
Outstanding Loan Amount	₹ 5,00,000	₹ 5,00,000
Interest Rates	15 %	12 %
Remaining Tenure	3 years	3 years
EMI	₹ 17,333	₹ 16,607
Total Interest Payout	₹ 1,23,976	₹ 97,858
Total Amount Payable	₹ 6,23,976	₹ 5,97,858
Savings	-	₹ 26,118

Thus, on transferring your personal loan from lender A to lender B, you can save upto ₹ 726 on your per month EMI, which amounts to saving ₹ 8,712 per year. Further, the saving on total interest payout on transferring the loan would be ₹ 26,118 . If you want additional funds, you can avail personal loan top up at the time of balance transfer.

Interest Calculation on Personal Loan can be done using flat rate or reducing balance method. All leading banks and NBFCs in India calculate the interest rate on personal loans using the reducing balance method which is a more transparent method of calculation and recommended by RBI. A flat rate of interest is always costlier than a loan taken on reducing balance at the same rate as explained in the table below where interest outgo on a loan taken on a flat rate of 14% is 1.8 times that on a personal loan taken on a reducing rate of 14%.

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

The functioning of the above-mentioned methods can be understood with the help of the following table:

Parameters	Flat Rate Method	Reducing Balance Method
Loan amount	₹ 6,00,000	₹ 6,00,000
Tenure	60 months	60 months
Rate of Interest	14 %	14 %
Monthly EMI	₹ 17,000	₹ 13,961
Total Interest Payout	₹ 4,20,000	₹ 2,37,627
Savings	-	₹ 1,82,373

As personal loans are unsecured loans, banks consider several factors before deciding to sanction the personal loan minimum interest rate. Keep in mind the following factors that affect personal loan rate to get best interest rate:

• Check special offers for your company:- Always check current offers and interest rates offered for the company you are working for, as banks run special schemes for employees of top companies. The reputation and rating of the organization you are currently working for also help you grab a decent interest rate on personal loans.
• Compare bank offers for various loan amounts:- Some banks offer low interest rates at a higher loan amount. Thus you must compare bank offers for varying loan amounts. Always compare bank offers for varying loan amounts.
• Check for rates at various loan tenure:- Banks may offer lower rates on personal loans for certain tenure and, you must opt for tenures with lower interest rates.
• Apply for a loan amount within the limit you are eligible for:- Applying for an amount higher than your eligibility may lead to rejection of your loan application. Always calculate your eligibility before applying for a personal loan to reduce chances of rejection.
• Avoid multiple bank applications:- 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.
• Look beyond the offer from your salary bank:- Various banks offer attractive schemes to acquire premium customers. Hence, the offer from your salary bank may not be the best option. In case you are an old customer of the lender via a savings or investment account, then it is likely that you will be eligible for pre-approved personal loans at concessional rates.
• Maintain a good credit score:- All personal loan lenders ensure lending loans to an individual with a good credit score of 700 and above. In case of a relatively low credit score, you may either get a personal loan at a high rate of interest or may not get it all.

The factors below affect latest personal loan interest rates in banks:

• Income: If you have a stable source of income, then banks might offer you a lower interest rate as you can repay the dues on time. On the other hand, lower annual income leads to a higher interest rate on a personal loan.
• Employer Details: Working for a reputed organisation means that banks and NBFCs are more likely to offer you a reasonable interest rate.
• Nature of the Employment: The interest rates to applicants may be further based on whether you are self-employed or salaried.
• Age: Your age also plays a determining factor in deciding the loan rates. Individuals who are nearing the retirement age may be charged a higher interest rate.
• Relationship with the Loan Provider: If you have a good existing relationship with the bank, then you would be offered best rate of interest for a personal loan.
• CIBIL: Your CIBIL score is also one of the crucial factors that helps the financial institution to decide the rate of interest. If you have a CIBIL of 650 or above, then you may get a best interest rates on a personal loan.

• Processing Fees:- Along with Interest Rates, banks also charge processing fees on a personal loan. A processing fee on a personal loan is a one-time fee levied on the loan amount to process the application.
• Foreclosure Charges:- If you want to prepay or close your personal loan account before the predetermined loan tenure, you need to bear fees for prepayment & foreclosure. These charges can range from nil to up to 6% of the outstanding balance.
• Late Payment Charges:-  Banks also charge a penalty on late payment of EMIs if you delay your Personal EMI.
• Other Charges after loan disbursal: -  A few other charges that the bank levies on personal loan customers post disbursement can include cheque bounce charges, fees for duplicate statements or loan switch fees. These charges are not to be paid by all customers and are applicable only when that event happens.

✅What is the personal loan interest rate today?

As per the current rates, ICICI Bank, HDFC Bank offers the lowest interest rate of 10.25%. However, the current rate of interest for a personal loan may vary based on your income and loan amount. Apply for a personal loan that you are eligible for to get the best rates. Other banks that offer low personal loan rates are Axis Bank, IndusInd Bank.

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

Typically, private banks like ICICI Bank and HDFC Bank offer best personal loan rates starting at 10.25%. Currently, most of the government banks do not offer unsecured personal loans except for loans provided under government schemes and hence are not a very popular choice. NBFCs typically have a higher interest rate compared to private banks for personal and are best suited for customers who are unable to meet the stricter eligibility criteria of private banks.

✅Can banks change the interest rate during the loan tenure for a personal loan?

No, in India all personal loans are fixed rate loans given their short tenure of 2 years to 5 years and hence, the rates does not change during the loan tenure. Always check for the type of interest that your bank is levying while sanctioning your loan to avoid surprises at a later date and to avail cheapest personal loan interest rate.

✅What is the average interest rate on personal loans?

All bank personal loan interest rates range between 10.25% to 36.00%. The personal loan interest rate of different banks will vary based on factors such as your credit score, your income, the company you are employed with, your age at the time of applying for the loan, etc.

✅Is there any relationship discount on personal loan interest?

If you have an existing relationship with the bank and have cleared all your dues on time, banks may give you a preferential interest rate. However, if you have a bad CIBIL and do not meet other eligibility criteria, you may not be able to avail of any relationship discount on personal loan interest.

✅Can I get a personal loan without interest?

No, all personal loans from a bank or NBFCs, whether secured or unsecured, are not provided without interest and hence you cannot get a personal loan less interest rate.