What is a personal loan?
A personal loan is a sum of money that you can borrow for many purposes. For example, you may utilize a personal loan to restructure debt, pay for house repairs, or arrange your ideal wedding. Personal loans are available through banks, credit unions, and online lenders. Borrowed funds must be returned over time, generally with interest. Personal loans may also be subject to fees from some lenders.
Personal loans are funds that may be used to meet a variety of personal costs. These loans might be secured, which means you must provide security to obtain money, or unsecured, which means no collateral is required.
Interest rates of personal loans
Several banks in India provide the greatest personal loans to their consumers, and you can apply for them either online or offline. However, before you apply for a personal loan, you should compare the interest rates given by various institutions, which range from 7.90% p.a. to 49% p.a.
Evaluate the top 5 banks’ newest “personal loan interest rates” and “processing fees” and apply immediately.
1. HDFC Bank
- Personal loan interest rate – 10.5%-21% p.a.
- Processing charges – equal to or less than 2.50%
2. IndusInd Bank
- Personal loan interest rate – 10.49%-31.5% p.a.
- Processing charges – equal to or more than 3%
3. Tata Capital
- Personal loan interest rate – equal to or more than 10.99% p.a.
- Processing charges – equal to or less than 2.75%
4. Bank of India
- Personal loan interest rate – 10.35%-12.35% p.a.
- Processing charges – equal to or less than 2%
5. Central Bank of India
- Personal loan interest rate – equal to or more than 9.85% p.a.
- Processing charges – equal to or less than 1%
How can you get the lowest interest rate?
Before taking a personal loan, here are some points to assist you to get the best interest rate:
- Boost Your Credit Rating: A good credit score demonstrates your creditworthiness. Banks and commercial organizations provide the cheapest personal loan rates to candidates with good credit. As a result, before seeking a personal loan, you should verify your credit rating. If your CIBIL score is less than 750, you should increase it before taking a loan. When your CIBIL score is above 750, you are more likely to get a low-interest personal loan.
- Constantly Check for Offers: Banks and other lenders sometimes offer special lending rates during holidays and other occasions. If you make a loan application while a similar offer is active, you can be offered a cheaper interest rate.
- Bargain with the Creditor: If you are a current client of a bank or have a strong connection with the lending institution, you may be able to negotiate a lower interest rate. It is best to make a formal request to the loan servicer while doing so.
- Avoid Missed Loan Payments: Your credit rating is directly linked to your borrowing abilities. Thus, it is affected if you fail to repay your loan or credit card balance. Before fixing personal loan interest rates, lends often consider your payback history. People who have paid their credit card dues and EMIs on time always are the ones who receive a reduced interest rate.
- Examine Interest Rates: When applying for a personal loan with a certain bank, assess the personal loan interest rates offered by several NBFCs and banks. This will help you get a loan with a low-interest rate.
What affects personal loan interest rates?
- Income: When setting the interest rate, lenders consider your income. People with a high salary are seen as less risk to the bank. Thus, they may be offered a lower interest rate. Those with lesser income, however, will have to pay a higher rate.
- Age: Your age can also affect the interest rate given by the lender. Those approaching retirements are likely to face a higher interest rate.
- Employer: If you work for a renowned company, the bank is likely to offer you a lower interest rate.
- Employment Type: Depending on whether an applicant is self-employed or salaried, lending companies may offer various interest rates.
- Connection with the Lender: Existing clients who have a strong relationship with the lender may be offered a cheaper interest rate when applying for a personal loan. This is at the bank’s will. Not all current clients will be awarded a favourable interest rate.
Which interest rate can be the lowest?
Suppose you take a personal loan with a fixed rate of interest. Your interest is fixed on the whole loan amount throughout the loan. Instead, if you withdraw a loan with a dropping balance interest rate, the interest is calculated only on the outstanding balance. This is significantly lesser than a fixed interest rate.
What should you remember about personal loan interest rates?
There are a few more points to note when taking a personal loan with a low rate of interest.
- Processing Fee: Lenders charge a one-time processing fee, which increases the interest rate. Thus, although you have a low-interest rate, you should calculate the processing fees imposed by various lenders.
- Pre-Closure Fees: Some banks charge a pre-closure fee if you settle the unpaid loan balance before the end of the loan term. Check to see if your chosen bank charges a pre-closure fee.
- Other Charges: While the lender may charge you a slightly higher interest rate, if the processing fee, pre-payment fee, loan cancellation charges, stamp duty charges, swap charges, and so on are low, you may be able to save on the overall cost of the loan.
With the help of this article, you shall be able to get the cheapest personal loan interest rates. For more information, check out the blogs by Piramal Finance!