Personal Loan Interest Rates

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Personal Loan Interest Rate Trends

Most banks will charge you an interest rate ranging between 10% p.a. to 24% p.a., if not more. Loan providers like Yes Bank, IndusInd Bank, Citibank, ICICI Bank, Kotak Mahindra Bank, and Tata Capital charge low interest rates on personal loans that start from 10.75% onwards. Several other banks such as Aditya Birla Capital, HDB Financial Services, HDFC Bank, Axis Bank, and Ujjivan Bank charge slightly higher interest rates. However, these loans are characterised by low processing fees and other charges.

Compare Personal Loan Interest Rates 2019

Last Updated on
Lenders Min. Interest Rates Processing Fee Foreclosure Charges Late Payment Fees
Yes Bank 10.75% p.a. Up to 2.50 + GST 0 – 4% 24%
Citibank 10.99% p.a. 0.25% - 3.00% Up to 4% Nil
Kotak Mahindra 10.99% p.a 2.5% + GST 5% + GST 3%
IndusInd Bank 11.25% p.a 2.5% + GST 4% 150 + GST
ICICI 11.25% p.a 2.25% +GST 5% + GST 24%
Tata Capital 11.25% p.a INR 1499 + GST 4.5% + GST NA
InCred 11.49% p.a 1% As Per Lender NA
IDFC Bank 11.5% p.a 3.5% 5% 2%
Standard Chartered 11.99% p.a 3% 2% - 5% INR 495 + GST
Capital First 12% p.a 3.5% 5% 2% of Unpaid EMI
SBI Pension Loan 12% p.a 1% + GST 3% on Prepaid Amount 2% on Overdue Amount
SBI Xpress Credit 12.05% p.a. 1% + GST 3% on Prepaid Amount 2% on Overdue Amount
SBI Xpress Power 12.15% p.a. 1% + GST 3% on Prepaid Amount 2% on Overdue Amount
OBC Loan for Pensioners 11% p.a 1% + GST Nill 2% on Overdue Amount
Bank of Baroda 11.65% p.a 2% + GST NA 2% on Overdue Amount
IIFL 13% p.a 2% + GST Up to 6% 2% + GST
Bank of India 13.2% p.a 2% + GST NA As Per Bank
Aditya Birla Capital 14% p.a 2% + GST 3% 24%
HDB Financial Services (HDBFS) 14.99% p.a 2% + GST 2% - 4% 3% on Overdue EMI
Ujjivan Small Finance Bank 15.5% p.a 2% + GST Nill 2% on Overdue EMI
HDFC Bank Rack Rate: 15.50% p.a Up to 2.50% Up to 4% 2% on Overdue Amount
Axis Bank 16% p.a 2% + GST Nill 2% on Overdue EMI
Fullerton India 20% p.a Up to 6.5% Up to 7% Determined by Company
Karur Vysya Bank 12% p.a. to 18% p.a. Rs.500 onwards As per the lender As per the lender
IDBI Bank 10.2% p.a As per the lender 2% of the outstanding amount As per the lender
Federal Bank 10% p.a. to 27% p.a. As per the lender 2% of the outstanding loan amount As per the lender
Corporation Bank 12.90% p.a 1.50% Nill As per the lender
Bajaj Finserv 12.99% p.a Up to 3.99% 4% of the outstanding principal 2% of the EMI amount
RBL Bank 14.5% p.a. to 23% p.a. Up to 3% + GST As per the lender As per the lender
Punjab National Bank 12% p.a Up to 1.8% 2% As per the lender
Vijaya Bank 12.75% p.a 0.75% + GST As per the lender As per the lender
Andhra Bank Consumer Loans 11.6% p.a As per the lender Nill As per the lender
Andhra Bank Clean Loans 11.75% p.a As per the lender Nill As per the lender
Bank of Maharashtra 12.7% p.a 1% As per the lender As per the lender
Central Bank of India 11.6% p.a INR 500 + GST As per the lender As per the lender
City Union Bank 16% p.a 1.25% As per the lender As per the lender
Dhanalakshmi Bank As per the lender 2.5% As per the lender As per the lender
HSBC Bank 10.99% p.a. to 17.84% p.a. 1% As per the lender 3.75%
Karnataka Bank 13.2% p.a As per the lender As per the lender As per the lender
South Indian Bank 11.65% p.a 2% Up to 4% As per the lender
Indian Overseas Bank 11.95% p.a 0.40% onwards As per the lender As per the lender
J&K Bank Saholiat/Saral Finance Scheme 12% p.a As per the lender As per the lender As per the lender
Nainital Bank 11.45% p.a As per the lender As per the lender As per the lender

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 eligbility 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, 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 lower 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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Factors that Affect Personal Loan Interest Rates

The various factors that affect the interest rate charged for personal loans are as follows

  • Credit Score: 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.
  • Income: 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 interest rate. On the other hand, those with lower annual incomes may have to pay a higher interest rate.
  • Employer Details: If you work for a reputed organisation, the bank/financial institution is more likely to offer you a lower rate of interest.
  • Nature of Employment: Loan providers may offer different interest rates to applicants based on whether they are self-employed or salaried.
  • Age of the Applicant: 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.
  • Relationship with the Loan Provider: 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 favourable interest rate.

CIBIL RatingsCredit ScoreChances of Being Approved for a Personal Loan
PoorLess than 600You may not qualify for a loan
AverageBetween 600 and 750Loan may be approved, but at a high interest rate
GoodOver 750Loan is likely to be approved with a lower interest rate
ExcellentBetween 800 and 900Loan with a low interest rate, faster approval, larger loan amount

How to Calculate EMI on Your Personal Loan with the Interest Rate

Personal Loan EMI Calculation Formula

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 theLoan 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.

Illustration

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.

Fixed Interest Rates vs. Variable 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/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.

Tips to Avail a Lower Interest Rate

If you are looking to apply for a personal loan, here are a few tips that will help you avail a lower interest rate:

  • Improve Your Credit Score: A high credit score indicates that you are creditworthy. Banks and financial institutions offer lower 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.
  • Avoid Missing Repayments: 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.
  • Keep an Eye Out for Offers: 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.
  • Compare Interest Rates: Before applying to a particular bank for a personal loan, it is necessary to compare the interest rates charged by various banks and NBFCs. This will help you avail a personal loan at a competitive interest rate.
  • Negotiate with the Lender: If you are an existing customer of a bank or have a good relationship with the loan provider, you can negotiate for a lower interest rate. When doing this, it is advisable to submit a formal written request to the loan provider.

FAQs

Can banks change the interest rate during the loan tenure?

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.

Are personal loan interest rates fixed or floating?

You can opt for a fixed interest rate or floating interest rate, based on the options that are provided by the lender.

What is meant by reducing interest rate with regard to personal loans?>

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.

Should I take a loan from a loan provider that offers the lowest EMI?

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.

How often does the variable or floating interest rate change?

Banks will change the variable/floating interest rate each time the Marginal Cost-Based Lending Rates changes. Thus, the floating interest rate is a good option for those who are prepared for fluctuations in the interest rate.

What is the average interest rate on personal loans?

Most lenders charge interest rates between 10.99% p.a. and 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.

How can I lower the interest rate charged for a personal loan?

To be offered a personal loan at a better interest rate, you should aim to improve your credit score. If you currently have a credit card or an outstanding loan, you should ensure that you don’t miss any repayments. You can also try negotiating with the loan provider to offer you a loan at a better interest rate.

How do I benefit if the interest is calculated on a daily/monthly reducing balance?

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.

Is there any relationship discount on interest rates?

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.

How does balance transfer help you get a lower 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.

News about Personal Loan Interest Rate

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