Personal Loan Interest Rates in 2021 – Latest Interest Rates of Banks and NBFCs

Author : Nagaraj S | Published On : 21 Sep 2021

Personal Loan Interest Rates in 2021 – Latest Interest Rates of Banks and NBFCs

Personal loans are unsecured credit that can be borrowed from banks and financial institutions to meet short-term financial requirements. This loan does not require collateral or security, and it requires minimal documentation.

The personal loan interest rates vary between banks and financial institutions depending on the borrower's credit history and the credit score of the lender. Personal loans should be applied for after calculating interest rates and processing fees. Personal loans should be applied for with the interest rate in mind.

Low EMIs would be achieved by a lower personal loan interest rate. Personal loan interest rates are determined by banks and financial institutions taking into account a variety of factors, including the borrower's type and profile.

What factors influence the interest rate for personal loans?

Lenders consider many factors when deciding whether to approve personal loans at a low interest rate. This includes the applicant's profile and background. These are the most important deciding factors.

Income and organizationLenders will consider the income and salary of the borrower when deciding whether to approve a personal loan. Higher incomes will result in lower interest rates. Personal loans with low interest rates are only available to individuals who have proven themselves financially stable. Self-employed people will not be eligible for the same rate of interest as salaried employees, since their income is not fixed. A person who works for a large corporation or other reputable institution is more likely than others to be approved for a personal loan at low interest rates. This is due to the stability of the employer, which in turn leads to the borrower repaying the loans on a regular basis.

Credit scoreTo assess a borrower's creditworthiness, lenders will always examine their credit score. It's a measure of an individual’s ability to repay the borrowed amount. The Credit Rating Agency gives individuals a 3-digit numerical rank based on their repayment history. Higher credit scores mean better chances of getting a personal loan at a low interest rate. Lenders consider a credit score between 750-900 to be ideal and safe. This is used by banks and financial institutions as a deciding factor in determining personal loan interest rates. In addition to irresponsible repayment records, multiple loans from different lenders within a short time period can adversely impact the borrower’s credit score.

History and ratio of loan payments to income (FOIR)Before personal loans or personal loan interest rate approvals are made, it is important to carefully assess the borrower's past loans and repayment history. Lenders will be more trusting and confident if the borrower has been diligent with their repayments in the past. They will then be able offer personal loans at low interest rates. The bank will assess if the borrower has missed any payments over the past 12 months. If there is, the personal loan application will be rejected or the interest rate increased. Lenders also consider the ratio of pre-existing credit card and EMIs to borrower's monthly income. This is known as FOIR, or debt-to–income ratio. A FOIR of between 40% and 50% is considered ideal. This means that the borrower has the ability to repay the loan on-time. Lenders will not approve of borrowers who are above 50%. As a result, sanctioning and the personal loan interest rate may be affected.

Banking relationship –A borrower's past history of savings, bank deposits, and credit cards will also be a factor in determining if they are eligible for low-interest loans. It would be advantageous for the borrower to receive the highest personal loan interest rates if he or she has been a loyal customer. A good relationship with the bank staff and a consistent use of its services can help customers get low interest rates.

Type of applicants

Although income, work history, and background are important factors for securing low-interest loans, personal loan applicants will also be considered.

  • Salaried/self-employed - Because the income of a self-employed person is not guaranteed, they may not be considered to be safe. However, salaried people are considered to have stable jobs and steady income. A salaried person working for a well-respected organization has a better chance of getting personal loans at a lower interest rate than someone who is self-employed.
  • Women –Personal loans with low interest rates are offered by certain financial institutions to encourage female entrepreneurship and to help salaried women become financially secure. Fullerton India, Bajaj Finserv, and HDFC offer attractive interest rates to women.
  • Retired Pensioners -Banks such as State Bank of India, Bank of India (BOI), and UCO Bank offer personal loans at low interest to pensioners, particularly if they are active customers of these banks.

Below is a comparison of personal loan interest rates from different banks and NBFCs across India

Current Personal Loan Interest Rates - 2021

Banks/NBFCs

Interest Rate (p.a.)

Loan Amount (Rs.)

EMI/1 lakh for 1 year (Rs.)

State Bank of India

9.60% onwards

Up to 20 lakhs

8,773

Central Bank of India

8.45% onwards

Up to 20 lakh

8,720

Union Bank of India

8.90% onwards

Up to 15 lakh

8,741

Punjab National Bank

8.95% onwards

25,000 to 15 lakh

8,743

Indian Bank

9.05% onwards

As per applicant profile

8,747

Bank of India

9.35% onwards

Up to 10 lakh

8,761

IDBI Bank

9.50% onwards

25,000 to 5 lakh

8,768

Bank of Maharashtra

9.55% onwards

Up to 20 lakh

8,771

UCO Bank

8.45% onwards

Up to 10 lakh

8,720

HSBC

9.75% onwards

Up to 30 lakh

8,780

Citibank

9.99% onwards

Up to 30 lakh

8,791

Bank of Baroda

10.00% onwards

50,000 to 10 lakh

8,792

Kotak Mahindra Bank

10.50% onwards

Up to 30 lakh

8,803

Indian Overseas Bank

10.30% onwards

Up to 15 lakh

8,,806

Federal Bank

10.49% onwards

Up to 25 lakh

8,814

ICICI Bank

10.50% onwards

50,000 to 25 lakh

8,815

IndusInd Bank

11.00% onwards

50,000 to 15 lakh

8,838

IDFC First Bank

11.00% onwards

Up to 40 lakh

8,838

Axis Bank

11.00% onwards

Up to 15 lakh

8,838

Standard Chartered Bank

11.00% onwards

1 lakh to 50 lakh

8,850

Bajaj Finserv

11.49% onwards

Up to 15 lakh

8,861

Tata Capital

11.75% onwards

Up to 20 lakh

8,873

StashFin

11.99% onwards

1000 to 5 lakh

8,884

Faircent

12.00% onwards

Up to 10 lakh

8,885

Kreditbee

12.24% onwards

1000 to 2 lakhs

8,896

Yes Bank

12.49% onwards

Up to 50 lakh

8,908

HDFC Bank

12.50% onwards

Up to 25 lakh

8,908

MoneyTap

12.96% onwards

3000 to 5 lakh

8,930

Fullerton India

13.00% onwards

Up to 25 lakh

8,932

Indiabulls

13.99% onwards

1000 to 15 lakh

8,978

RBL Bank

14.00% onwards

1 lakh to 20 lakh

8,979

Muthoot Finance

14.50% onwards

50,000 onwards

9,002

Moneyview

15.96% onwards

5000 to 5 lakh

9,071

PaySense

16.80% onwards

5000 to 5 lakh

9,111

EarlySalary

18.00% onwards

Up to Rs. 5 lakh

9,168

Home Credit

24.00% onwards

Up to 2.4 lakh

9,456

CASHe

33.00% onwards

6000 to 4 lakhs

9,897

HDB

Up to 36%

Up to 20 lakhs

10,046

 

 

How to get a personal loan at a low interest rate

Eligibility

  • The minimum personal loan eligibility requirement is:
    - At least 21 years old should apply for a loan
    The minimum monthly net income of the applicant should not exceed Rs. 25,000
    - The applicant must have worked at least two years and have spent one year at the current company.
  • Eligible applicants are employees of public and private companies as well as central, state and local authorities.
  • If rented, must have stayed at least one year in the current residence

After determining eligibility, it is time to make sure that all conditions are met to be eligible for low-interest personal loans. This includes:

Compare all Offers -It is crucial that the applicant has information about all interest rates for every institution or bank when looking for a personal loan at low interest rates. To understand the interest rate and processing fees of each bank, it is essential to visit their websites and compare them to determine the best option for you. This is where an individual can find attractive personal loan rates and make a comparison.

Get a loan from a trusted lender -An established bank or financial institution that the individual has made transactions and deposits regularly is more likely than an unidentified financial entity to offer preferential interest rates. Banks may offer discounts, loans at low interest rates and other offers depending on the relationship that the person has with them. The trust built through familiarity can lead to higher interest rates.

Keep a high credit scoreCredit score is a measure of creditworthiness. The less debts and defaults, the higher the credit score. A personal loan with low interest rates will be possible if the credit score is higher than 750. It is important to maintain a healthy credit rating. This can be done by keeping track of all financial transactions and being responsible lenders.

Leverage work credentialsStable employment is vital for lenders as it shows that the borrower has the ability to repay the loan on time. The chances of a borrower getting personal loans at low interest rates are higher if he/she has a steady job with a well-respected organisation. To secure high interest rates, the borrower must leverage his/her company's reputation and position.

How do I calculate the interest on a personal loan?

Banks and other financial institutions calculate the interest rate they charge by taking into account several important factors.

CIBIL Score

This score is a measure of creditworthiness. The higher the CIBIL score, the lower the interest rate. The minimum CIBIL score required to obtain a personal loan depends on the policies of each lender.

Principal Amount

Borrowers with a good track record of repayment will have a greater chance of getting personal loans at lower interest rates.

Loan tenure

The interest rate will be lower if the repayment term is shorter.

Calculating personal loan interest can be done using-

 

  • Flat Rate Method for Interest Calculation:This method calculates the personal loan interest rate based on the initial principal amount, without taking into account the principal repaid. This method of lending rates remains the same throughout the loan term. This method of interest calculation results is a higher EMI.
  • Interest Calculation Using a Reducing Balance Method: The outstanding loan amount will be reduced in this instance by making EMI payments. The interest rate for the following month will be based on the remaining loan amount. The interest rate is calculated based on the loan amount that is decreasing, and not on the amount originally borrowed. The personal loan interest rate is based on the principal balance at the end of the specified period.

 

 

 

Calculating EMI for a personal loan

Here's how to calculate the interest on a personal loan:

The interest on a personal loan is calculated in the following manner:

 

EMI = [P x (R/100) x {1+(R/100)} ^N]/[{1+(R/100)} ^(N-1)]

Where,

EMI = equated monthly instalments

P = the principal amount borrowed

R = loan interest rate (monthly basis) = annual interest rate/12

N = loan tenure (in months)

Let us assume that a borrower borrows a sum of Rs. 7 lakhs at a rate of 12% for a tenure of 5 years, the interest for the 1st month will be calculated as follows:

(7, 00,000*0.12/12) =7,000

These are the top 10 banks in India offering the lowest interest rates on personal loans:

Top 10 banks offering lowest interest rates -2021

Bank Name*

Interest Rate

Processing Fees

State Bank of India

9.60% onwards

Up to 1.5%

Central Bank of India

8.45% onwards

Up to Rs. 500

Union Bank of India

8.90% onwards

0.50%

Punjab National Bank

8.95% onwards

Up to 1%

Indian Bank

9.05% onwards

Up to 1%

Bank of India

9.35% onwards

Up to 2%

IDBI Bank

9.50% onwards

Up to 1%

Bank of Maharashtra

9.55% onwards

Up to 1%

UCO Bank

8.45% onwards

Up to 1%

HSBC Bank

9.75% onwards

Up to 1%

 

Remember to -

Make repayment a priorityTo get a better interest rate, it is important that you pay your credit card bills on time. A responsible credit history will help you negotiate better.

Search for special deals and offersLook out for seasonal offers and programs that banks offer, especially during the holiday season, which could promise lower interest rates on personal loans.

Take care to calculate interestEven if the interest is low, you might end up paying more. This is especially true if you take on a flat rate of interest. You should also consider the bank's processing fees, which can vary from one bank to another.

Bank customer service -Look for institutions and banks that provide outstanding customer service and ongoing assistance with loan repayments and sanctioning loans.

Conclusion

Personal loans are among the easiest loans that banks and financial institutions can disburse. After evaluating the applicant's credit score, income level, and employment history, the lender will likely offer good interest rates to the borrower. Although personal loan interest rates can vary between lenders, the borrower will be able to get the best rates if he/she keeps an eye out for offers, compares all interest rates, leverages his/her employment status, and has a high credit score.