Knowing the rate of interest for a personal loan will help you make smarter decisions in life.
Personal loans are often used to pay for necessities, such as appliances, furniture, and car repairs. However, personal loans can also be used to enhance one’s lifestyle or save for a special occasion.
Personal loan interest rates may vary depending on your credit score, age, and other factors. If you’re planning to get a personal loan then it’s important to learn the rate of interest for personal loans that are available in the market. It’s an essential part of being financially stable.
How Do Rates of Interest For Personal Loans Work?
The rate of interest for a personal loan is based on the principal amount that you have borrowed and is expressed by the lender as a percentage.
The rate applied to your loan includes any fees like processing fees and other costs and is known as the nominal annual percentage rate or APR.
Personal loans are usually unsecured loans and hence, charge a higher interest rate compared to secured loans. An unsecured loan simply means a personal loan scheme that is not backed by a collateral or recoverable asset.
Factors That Affect Personal Loan Interest Rate and Charges
The advertised interest rate isn’t always the actual rate for the loan. Many aspects of your credit and financial situation are considered to determine the most suitable rate of interest for a personal loan. Based on your financial strength along with your credit history and income level it is possible to get approval for a lower rate.
- Job Status and Income: The lender may take into consideration the borrower’s job status and income, as these can influence the probability of repayment. The borrower with a low income or a history of late payments typically pays the highest interest rates since there’s no guarantee they’ll be able to make the full payment.
- Credit score: Credit score plays a crucial role in loan approvals. People with a strong credit rating are more likely to receive better rates because they are at a lower chance of default. In general, a score of 750 or more is considered a good CIBIL score. The CIBIL Score For SBI Personal Loan is 650 and above.
- Credit history: Having a sound credit history is as much important as any other factor. If you have a history of defaults in repayment, the lender may charge you a high rate of interest or may even reject your loan application. Make sure all credits are repaid on time to ensure a good credit history.
- Existing debt: Whether the borrower has existing debt or not is another factor that is taken into consideration by the lender for estimating the rate of interest for a personal loan. If you’re in the middle of major debt, your profile will appear unfavourable to lenders. This can affect your chances of securing a competitive interest rate. However, If you’re able to manage your obligations, you can get a decent rate of interest.
- Relationship with the lender: Your relationship with your lender may aid in the process of approval. If you’ve been involved in a previous deal with a lender they could offer you an attractive rate for personal loans. This is because the lenders will likely trust those borrowers whose financial information they keep on record.
Rate of Interest on Personal Loans for Different Banks
|Interest Rate (p.a.)
|State Bank of India
|10.55% – 15.05% p.a.
|11.00% p.a. onwards
|Punjab National Bank
|9.80% – 16.35% p.a.
|Bank of Baroda
|10.20% – 17.55%
|Union Bank of India
|10.80% – 14.90%
|Bank of India
|9.75% – 14.25%
|10.30% – 14.40%
|Kotak Mahindra Bank
|Central Bank of India
|10.35% – 11.95%
|11.00% – 15.50%
|Indian Overseas Bank
|11.90% – 12.90%
|10.49% – 17.99%
|Bank of Maharashtra
|8.90% – 14.70%
|IDFC FIRST Bank
|17.50% – 26.00%
|Standard Chartered Bank
How much is the typical rate of interest for personal loans?
The majority of banks offer personal loan interest rates ranging from 10.50% and 24 per cent p.a. The interest amount you pay will depend on several aspects like your credit rating, earnings, the organization you work for and your age when you apply for loans, and so on. Therefore, ensure that you look at the interest rates of various lenders before applying for personal loans.
How to Avail a Personal Loan at Low-Interest Rate?
Below are a few crucial factors you should consider before getting a personal loan at a low-interest rate:
- Your credit score should be maintained at 750 or above.
- Many banks offer pre-approved, immediate personal loans. Keep an eye out for those.
- If you have already taken a loan from a bank or NBFC, or have a savings account in one, ask them about a personal loan at a low-interest rate.
- Many lenders give special loan interest rates during the festive or holiday season. Look out for these.
- Always compare personal loan offers, interest rates, etc provided by different lenders on the online financial markets.
Fixed Rate Vs Floating Rate for Personal Loan
In the case of loans with fixed interest rates, the rate is constant for the duration of the personal loan. With floating-rate loans, the rate may occasionally change as a result of variations in market interest rates. Since personal loans typically have a short term of up to 5 years, the majority of them are now available at fixed rates.
The Bottom Line
As you read above, it is important to know the rate of interest for a personal loan to make the right financial decision. When planning to get a loan, always compare interest rates of different financial institutions, build and maintain a sound credit rating, and maintain a good credit history.
If you planning to avail of a personal loan at reasonable interest rates, reach out to Piramal Finance.