There are many banks offering unsecured personal loans to borrowers. But, it is good to borrow from lenders who offer lower rates with shorter tenures. Customers with excellent credit scores also get lower interest rates. Personal loan interest rates are generally higher since they are unsecured loans and are considered riskier. Also, the higher the tenure, the higher the outgo of interest.
5 Banks Providing Offering Personal Loan Interest Rates
|Bank||Amount of personal loan||Personal loan tenure||Return on Interest|
|Punjab National Bank||Upto 10 Lakhs||Upto 60 months||9.35% – 15.35%|
|Indian Bank||Between Rs. 50000 to Rs. 5 Lakhs||12 to 36 months||9.40% – 9.90%|
|Karur Vysya Bank||Upto 10 Lakhs||12 to 60 months||9.40% – 19.00%|
|IDBI Bank||Between 25000 to Rs. 5 Lakhs||12 to 60 months||8.90% – 14.00%|
|State Bank of India||Between 25000 to 20 Lakhs||6 to 72 months||9.80% – 12.80%|
Fixed Or Floating Interest Rate
If the interest rate is fixed, then changes in the bank’s MCLR will not affect your equated monthly installment (EMI) amounts. You should confirm with the lender whether the interest rate is fixed or floating based before applying for the loan. Since personal loans are unsecured, the interest rates are higher compared to other loans like home loans and gold loans.
Charges In Personal Loan
The bank or the NBFC will charge fees, such as processing, stamp duty, and other statutory costs for a personal loan. Moreover, the lender has the right to collect pre-closure or pre-payment fees. Verify the various costs associated with the loan before accepting a loan from the lender.
Tips To Get Personal Loans At The Lowest Interest Rates
When you apply for the cheapest personal loan, follow these tips to get the lowest interest rates possible:
- A solid credit history is important: Banks and other financial institutions offer the lowest personal loan interest rates to customers with good credit scores. When requesting a personal loan, a solid credit history is crucial. Therefore, you need to check your credit score before applying for a personal loan. If your credit score is below 750, you should take steps to improve it. If your credit score is more than 750, you have a greater probability of getting a personal loan at the best possible rate.
- Make sure that you have not defaulted on repayments: Banks and financial institutions give the lowest interest rates on personal loans to people with a good repayment history. So, people who have paid their loan EMIs and credit card bills on time will have higher chances of getting lower interest rates on their personal loans.
- Apply For A Personal Loan During Holidays: Banks and other financial institutions give holiday offers for attractive interest rates. However, this will be applicable only for a limited time. So, to acquire the best and lowest rates, it is wise to apply for a personal loan during holidays.
- Check and Compare Interest Rates: It is important to check the interest rates offered by other NBFCs and banks. In this way, you can get the personal loan with the lowest interest rates.
- Good Relationship With The Lender: You can get the best interest rate if you are the bank’s customer or have a good working relationship with the lender.
Things To Look For While Applying For Low Interest Personal Loans
While applying for the cheapest personal loans, keep these things in mind
- Check The Processing Fees: Loan providers charge a one time fee called processing fees for transactions. Although the interest rates are going to be very low, compare the processing fee offered by various lenders.
- Assess Their Customer Service: Before you complete the loan application, evaluate the customer service of the lender. See whether they respond well to your support requests. This is really important as if there is any issue with the loan in future, your lender should have robust customer services in place to get it resolved.
- Inquire About The Pre Closure Fee: A preclosure fee is a charge that banks or NBFCs levy if you repay the loan before the loan repayment tenure ends. So, inquire about the preclosure fee before you apply for the low interest personal loan.
- Check your Eligibility: Verify your eligibility for the loan such as age, income, credit score, etc. Make sure that you comply with the lender’s eligibility requirements.
- When you ask for a personal loan due to an emergency, consider the loan’s payout period.
- Consider all the charges involved in a personal loan: Although the interest rate may be low, you must take into account various charges, such as the default charges, processing fees, prepayment charges, loan cancellation fees, duplicate statement fees, stamp duty fees, and other charges.
Factors Influencing Personal Loan Interest Rates?
- Income: A stable income will get you a personal loan at lowest interest rates.
- Working For A Reputed Firm: Banks give personal loans at lower interest rates to people who are employed in a reputed organization. This is because banks see them as low risk.
- Age: A higher interest rate is applicable to borrowers who are nearing their retirement age. While middle aged borrowers will get lower interest rates. So, age is a crucial factor.
- Customer’s relationship with the lender bank: Banks favor customers who have a good relationship with the bank and a good repayment history with low interest rates on personal loans.
- Credit History and Credit Score: Before approving a personal loan, the lender will consider the credit history found in the credit report and also the credit score. This indicates the borrower’s financial discipline and his prompt repayment habits. The higher the credit score, the higher is the applicant’s creditworthiness. So, if you have an outstanding credit score, you will get minimal interest rates on personal loans.
- Fixed Obligation To Income Ratio or FOIR: It represents the applicant’s monthly income divided by the existing loan EMIs. The amount that goes towards credit card bills and EMIs monthly is crucial in evaluating the borrower’s personal loan application. A FOIR of 50% or greater is seen as a risk factor by lenders that may impact a borrower’s loan eligibility and personal loan interest rate.
- Credit Utilization ratio or CUR: The ratio of credit used to total credit available is called the credit utilization ratio. A higher CUR indicates credit hungry behavior. This is seen as a risk by lenders and they will charge higher interest rates on personal loans given to such applicants. An ideal CUR should be below 30%.
- Multiple Debts: When you already have multiple loans or credit cards, lenders see this as a risk. They doubt if you will be able to pay off your debt when you already have a lot of it. So, they may either not approve the loan application or charge higher interest rates.
You can get personal loans at low interest rates. Compare various banks and choose the one that offers lowest personal loan interest rates. Also, follow the tips above to get attractive interest rates on personal loans.