Personal Loan Interest Rates

Top private banks usually start personal loan interest rates at around 10.49% per annum. However, certain public sector banks may provide even lower interest rates for their personal loan offerings. The interest rates set by lenders for personal loans are determined based on factors such as their operational costs, profit margins, and the creditworthiness of the loan applicants.

Banks and other loan companies decide how much interest to charge for personal loans based on their own risk-based pricing models. These rates can be quite different from one lender to another. So, it's a good idea for people who are thinking about getting a loan to check and compare the interest rates from different lenders before they decide where to apply.

Also, there are several other banks and finance companies that provide personal loans for individuals. Here are the interest rates offered by these lenders:

The interest rate on personal loans is the yearly cost of borrowing for a specific loan program that banks or non-banking financial companies (NBFCs) charge their borrowers. It is typically represented as a percentage of the main loan amount. Personal loan interest rates can differ from one lender to another. Even within a single lender, the actual interest rates provided to applicants for personal loans depend on factors like their credit scores, income, repayment capacity, and other aspects of their credit history.

People looking to apply for a personal loan should review and compare the interest rates and other features of personal loan offerings from various lenders before submitting their final loan application. Here are the interest rates offered on personal loans by some prominent public and private sector banks:

If you're considering a personal loan, you can choose HDFC Bank, which offers personal loans starting at an interest rate of 10.50% per annum. The interest rate provided by the bank is determined based on various factors such as the applicant's credit/CIBIL score, loan tenure, amount, income, and more.

SBI offers personal loan schemes with starting interest rates from 10.55% per annum. The interest rate for loan applicants is determined by the lender, considering factors like the type of loan scheme, the applicant's employment profile, employer details, and the existing relationship with the salary account.

ICICI Bank provides personal loans with interest rates starting from 10.65% per annum. The rates can vary depending on the specific personal loan schemes offered by the lender. The final interest rates for loan applicants are typically determined by factors such as credit scores, employment profile, repayment capacity, income, and other relevant considerations.

You can get personal loans from Bank of Baroda with interest rates starting from 10.10% per annum. The lender provides varying interest rates to applicants, mainly influenced by factors such as employment profile, occupation, existing account relationship, selected scheme type, and any salary account association.

Those looking for personal loans can get them from Axis Bank with interest rates starting from 10.49% per annum onwards. While the specific factors influencing the personal loan rates are not disclosed by the lender, individuals with higher credit scores, income, and repayment capacity are generally more likely to secure personal loans at lower interest rates from Axis Bank.

Banks and non-banking financial companies (NBFCs) typically determine the interest rates for loan applicants based on the following factors:

1. Credit scores, monthly income, occupation profile, and other aspects of the personal loan applicant’s credit profile

2. Applicant’s existing deposit or lending relationship with the lender

3. Lender’s cost of funds

4. Net interest margins for the lender

To secure a personal loan with a low interest rate, consider the following key points:

1. Maintain a credit score of 750 or above.

2. Explore pre-approved instant personal loan offers from banks and NBFCs.

3. Inquire with banks/NBFCs where you hold existing deposit and/or loan accounts.

4. Monitor interest rate concessions provided by lenders during festive seasons.

5. Visit online financial marketplaces to review and compare personal loan offers from different lenders.

Lenders determine personal loan interest rates primarily by considering their cost of funds and assessing the credit risk of loan applicants. Here are key factors that can impact your personal loan interest rates:

• Income: If you earn more money, it means you can likely pay back a loan more easily. This makes it less risky for the lender. So, many lenders give lower interest rates on personal loans to people with higher incomes.
• Credit Score: Nowadays, lenders consider the credit scores of loan applicants when deciding on interest rates. If you have a higher credit score, you're likely to get a personal loan with a lower interest rate. So, it's a good idea to aim for a credit score of 750 or above. To maintain a good score, make sure to pay your credit card bills and EMIs on time, and avoid applying for multiple loans or credit cards in a short span.
• Employer: Lenders often look at where their loan applicants work when deciding on interest rates. People with a fixed salary usually get lower rates than those who are self-employed because of the steady income. Among those with salaries, government and PSU employees usually get the best rates because of their job security. After that, people working for MNCs and well-known private companies might also get good rates because these companies are seen as more stable during tough economic times compared to other private firms.
• Existing lending or banking relationship with the lender: Many lenders provide personal loans at discounted interest rates to applicants who already have a banking or lending relationship with them. Therefore, individuals looking to take out personal loans should reach out to the banks/NBFCs where they already have an existing lending or banking connection to explore potential personal loan offers.

Banks and NBFCs calculate interest on personal loans using the reducing balance method. This means they figure out the interest based on the remaining amount you owe after each EMI payment. At the beginning of repaying your loan, most of your EMI goes towards interest. But as you keep making payments, the remaining amount you owe decreases, and so does the interest you pay with each EMI.

Methods to Calculate Interest Rates

The method of interest calculation under each of these methods is as follows:

• Annual reducing balance method: With this method, the interest is figured out based on the remaining loan amount at the end of each year.
• Monthly reducing balance method: In this method, the lender calculates interest on the entire remaining loan amount at the end of each month. When the borrower makes an EMI payment, the lender deducts that amount from the total outstanding and then calculates the interest based on the reduced remaining principal.
• Daily reducing balance method: In this method, lenders calculate the interest amount on a daily basis. This means that interest is charged on the remaining loan balance for each day.

Most lenders use the monthly reducing balance method for the interest calculation of their loans.

When applying for a personal loan balance transfer, it's a process similar to getting a new personal loan. The potential lender will evaluate your credit history and set the interest rate accordingly. If your credit profile has significantly improved since taking out the original personal loan, or if your current credit profile aligns with the new lender's risk assessment criteria, opting for a balance transfer could enable you to secure a personal loan with a lower interest rate, reducing your overall debt burden.

The interest rates for personal loans are also influenced by the lender's cost of funds, margins, and various financial or market-related factors. Lenders with lower costs or favorable interest rate determinants are more likely to offer lower interest rates, especially when you choose to transfer your balance.