Personal Loan Interest Rates

Personal Loan Rate of interest

The interest rates are a ground basis for obtaining or rejecting the loan, and that's why the banks are trying to offer plenty of different interest rates to attract creditors. Thus, you will have a brief idea of personal loan interest rates in the following segments.

How to calculate personal loan rate of interest ?

Personal Loan Rate of interest calculation?
The Personal Loan interest rate formula helps understand the capital you have to pay for the loan taken and the interest paid against it. The personal loan rate of interest can be calculated in two different ways. One is the Simple Rate of interest, the Formula mentioned below

Personal Loan Interest Rate = (Personal loan rate of interest × 100)/(Loan Amount × tenor)

The Second way is compound interest, Formula mentioned below

Compounded Interest Rate = P (1+R) T – P
Were,
• P = Principal amount
• R = Rate of interest
• T = Tenor

Let's understand with a few examples:
Example: If Praveen has given Rs 10000 to his friend and received 12000 after one year. Find at what interest rate did Praveen has given the amount to his friend by using the interest rate calculation formula?
Solution:
Principal amount = Rs 10000(given)
Simple interest =Rs 12000- Rs 10000= 2000
Time = 1 year

Using interest rate formula,
Interest Rate = (Simple rate of Interest × 100)/(Principal Amt × Tenor)
Interest Rate = (2000 × 100)/(10000 × 1)
Interest Rate = 20%

i.e., Praveen will take a 20% rate of interest from his friend.

Why is it important to compare different banks' interest rates?

The personal loan interest rates are usually higher compared to other loans but to grab the best deal for yourself, comparing various banks' interest rates is essential because you have a planned decision, and it will have lesser chances of going wrong.

So, how do you compare the Rate of interest on a personal loan?

Are you going to banks?

The straight answer is No due to inconvenience. That's why loans4you.in is available at your service, a neutral marketplace for comparing different rates of interest offered by the banks, helping you make the appropriate decision for you.

Type of personal loan interest rate

Different type of Rate of interest:
There are varied interest rates in the market, and before deciding, you must understand its pros and cons. So, to understand better, keep reading the next segment and avail benefits from it.

Floating rate of Interest :
As the name suggests, the rate is not fixed, meaning varies from time to time, and its references are the base rate of a bank and the BPLR of NBFC.

RBI typically reviews its policy quarterly & based on India's economic situation, and RBI can increase the Repo and Reverse repo rates. Still, banks/HFCs choose to stick to the present Rate or can increase the Reference rate leading to the ROI increment of the personal loan customer and vice versa. Currently, the maximum customer opts for floating Rate of interest because they're relatively lower & brings unexpected gains. However, the risks are relatively high.

Fixed rate of Interest:
Personal loan fixed interest rate means that the offered interest rate by the banks in India will remain unchanged for the entire loan tenure.

These are at least 1% to 2% higher than the floating rate on a personal loan. Also, the significant benefit is that the borrower feels safe from the unexpected increase in the mortgage rates. However, the same borrower can't take advantage of the falling market interest rates.

Fixed Plus Floating rate of Interest:
It is the blend of fixed and floating rates of interest, where the mortgage rate for the initial period is fixed, and then it varies.
For Example, A person has a personal loan of 20 lakhs for 20 years, then first two years, he will pay a fixed interest rate, say, 8%, and after that, it switches to a floating Rate of interest. So, it would be best to be careful while choosing the bank/NBFC, as once your fixed interest rate period is over, they may raise the floating Rate by a significant number.

Lowest Personal loan Rate of interest

Bank Name Processing Fee Repayment Charges
SBI 0 - 1% Plus GST of the loan amount 0 - 3% Plus GST of Outstanding Amt
HDFC Bank 2% Plus GST with Minimum of Rs 3,500 0 - 4% Plus GST of Outstanding Amt
Tata Capital Rs 4999 - Rs 10999 Plus GST 4% Plus GST of Outstanding Amt
IDFC Bank Ltd 2 - 2.50% Plus GST of the loan amount 5% Plus GST of Outstanding Amt
ICICI BanK Upto 2.50% Plus GST of the loan amount 5% of the principal outstanding + GST
Kotak Mahindra Bank 0.99 - 2.50% Plus GST of the loan amount 5% Plus GST of Outstanding Amt
Yes Bank Upto 2.50% Plus GST of the loan amount 0 - 2% Plus GST of Outstanding Amt
IndusInd Bank 2.50% Plus GST of the loan amount As applicable by the bank
Axis Bank 1.5 - 2% Plus GST of the loan amount 0 - 2% Plus GST of Outstanding Amt
Fullerton India 2.00% Plus GST of the loan amount 0 - 4% Plus GST of Outstanding Amt
RBL Bank 2 - 2.50% Plus GST of the loan amount 3 - 5% Plus GST of Outstanding Amt
Standard Chartered Bank 1.00% Plus GST of the loan amount 1 - 5% Plus GST of Outstanding Amt

The personal loan rate for salaried

Salaried individuals like government employees, CAs, doctors, or people with stable incomes are offered lower interest rates due to income security.

The personal loan rate for SENP

This includes people in business who usually seek a higher loan amount, but the rules remain the same: stable-income individuals have lower interest rates.

Personal loan interest rates as per loan amount

There are factors affecting your loan amount, and those are:
• Credit score
• Existing debt
• Loan repayment terms & conditions
• Employment history & current income

Factors affecting your personal loan rate of interest

The interest rate varies by small numbers, depending upon the lender or the bank. Still, consumer loan interest rates can vary considerably depending upon the borrower & the lender. Thus, the significant factors affecting your personal loan interest rate are given below.

Income:
If an individual has regular income, his loan repayment capacity will be positive. Thus, he will be offered lower interest rates and vice versa.

Occupation:
Even though you have a regular income, that income source is unsecured, so the bank will offer a higher interest rate to cover the insecurities.

Credit score:
A higher credit score means a higher trust and possibility of repaying the loan, so lower the personal loan rate of interest. Also, CIBIL scores of 750 or above are regarded well. ss

Previous experience :
If the bank finds you faulty in your previous loan history, then the bank will charge a higher interest rate considering you a threat or may reject your loan. So, your record for at least 12 months should be non-faulty and clear.

DTI ratio:
The debt-to-income (DTI) is your monthly debt payments to your monthly income ratio. So, even if you're earning a high salary but significant portions go into the debt repayment, thus will you have a high DTI ratio and, similarly, higher interest rates.

Tips for reducing the personal loan interest rates

Your existing debts significantly influence your personal loan interest rates, and it is correct to say that both have proportionality ratios.

• Maintain good credit score
• Think about a personal loan balance transfer facility
• Evaluate the various interest rates online via loans4you.in and close for better deals.
• Prepay existing loans
• Debt consolidation into a single debt
• Go to a known lender

Personal Loan EMI Calculator

The online personal loan calculator will tell you about the monthly EMI and is easy to use. So, for availing of the facility, do the following:

• Go to the website loans4you.in
• Click on the personal loan EMI calculator
• Enter loan amount & loan tenor, and the interest rate.
• The answer will be your EMI.

Eligibiltiy Calculator

The personal loan eligibility calculator will tell you the maximum loan you're eligible to borrow by your date of birth, current income and expenses, including other EMIs. The answer will be your loan eligibility.

Balance Transfer Calculator

It will tell you about your personal loan affordability, your EMI for a personal loan balance transfer. You must enter the loan amount, loan tenor (in months), already paid EMI and EMI to be paid.

F.A.Q

  • No, there are no current benefits of a tax deduction on Personal interest rate.

  • Yes, you can use a personal loan for anything, but some lenders don't prefer that you pay tuition fees with that money. Also, some of the lenders/ banks will ask for the plans with cash & some will not.

  • Intentionally lying about using your personal loan is not advisable, and if the bank finds out, you will be sentenced to 30 years and must pay the penalty of 10Lakhs.

  • There are three types of personal loan interest rates in India: fixed, floating, and fixed + floating Rate of interest.

  • Advantages of personal loan
    • No penalties
    • No collateral security requirement
    • It can be used for anything
    Disadvantages of personal loan
    • Unnecessary debt
    • Higher interest rate
    • Credit damage

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