Personal Loan Interest Rate

Personal Loan Interest Rate

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Personal Loan Interest Rate


Personal loan is one of the most popular cash loans in the Indian market. Whether you’re living in Mumbai, Delhi or any other metro city, a quick personal loan is easily available and solves your urgent cash problems. What makes this loan very popular is because of its purpose. Yes, a personal loan can be taken to clear any problem or obligation. No matter how urgent your need is, an instant personal loan can help you with it.

A salaried employee or also a self employed person can get a personal loan. All you need is to fulfill the eligibility criteria set by the bank. Once you do that, all you need to do is compare interest rates of personal loan. This is so that you can choose the best bank to take the personal loan from. There are two types of personal loan interest rates: Fixed Rate & Floating Rate.

Fixed Interest Rate:


When you choose a fixed rate of interest for your personal loan, the rate which has been decided while signing the loan application will be the rate until you repay the whole loan amount. This means that no matter whatever changes happen in the market, it will not affect your fixed rate of interest. The people choose fixed personal loan interest rate assume that there will be a hike in the interest rates soon.

Advantages of Fixed Interest Rate for Personal Loan:


  • 1. No effect of fluctuation on Interest Rate:
  • There are changes which take place in the market every year. This affects the lending rate too. Hence if you have chosen a fixed rate of interest for personal loan, then you pay only for the interest rate that was decided. This option is favorable when the interest rates are increasing and is more than the rate agreed by you. You can save a lot of extra interest money and reduce your burden.
  • 2. Helps to follow your budget:
  • When you choose a fixed rate of interest for a personal loan, there is no rate change whatsoever during the entire period. Hence if you are on a strict budget, you need not worry about the extra interest rate affecting all your expenses. You will only pay a fixed amount until the loan tenure is complete.

Disadvantages if Fixed Interest Rate for Personal Loan:


  • 1. Higher interest amount paid:
  • When you choose a fixed interest rate in a personal loan, you might nearly pay more than 1-2.5% than the ongoing interest rate. The extra percentage includes different charges that you will have to pay along with the EMI. All these charges will be mentioned in the loan application.
  • 2. Absolutely no benefit on falling interest rates:
  • Perhaps the worst disadvantage of having a fixed rate of interest in a personal loan is that you can never take advantage of the falling interest rates in the market. Since you chose the fixed rate, you will have to pay that amount even though the current rate of interest is lower than the rate you signed up for.

Floating Interest Rate for Personal Loan:


When you choose a floating rate of interest for your personal loan, the rate which has been decided while signing the loan application will not just be the only rate until you repay the whole loan amount. Whenever there will be a change in the interest rates in the market, your EMI will change too. The people choose the floating personal loan interest rate assume that there will be a decrease in the interest rates soon.

Advantages of Floating Interest Rate for Personal Loan:


  • 1. Benefits of decreasing interest rate:
  • When the personal loan interest rate falls, in this scenario, the borrower can save money as he will have to pay a lower EMI than the usual case. Whenever the interest rates will fall, even your EMI will keep falling.
  • 2. Cheaper than fixed interest rate:
  • In general, a floating rate is lower than a fixed rate when we discuss about personal loans. As mentioned in the earlier scenario, the fixed rate of interest for personal loans will be higher by 1-2.5% more than the floating rate of interest. Hence this can be very beneficial towards you.

Disadvantages of Floating Interest Rate for Personal Loan:


  • 1. Unpredictable EMIs:
  • There can be no prediction made in a floating interest rate situation. Whenever the interest rate will increase, the borrower will pay high EMI and when the interest rate decreases, he will end up paying a lower EMI. Hence the borrower might pay the normal EMI, less than half of the normal EMI or sometimes even double of the monthly EMI.
  • 2. Not suitable for fixed income borrower:
  • For a borrower who has a fixed income and a strict budget to follow, the floating interest rate for personal loan is not advisable. This is because whenever the interest rates in the market will rise, the EMI will also rise and hence this will affect his budget drastically and might increase the chances of defaulting on a loan.

Credit Score


For any borrower to get a personal loan, it is important to maintain a good credit score. Because this loan is unsecured in nature, the banks will place more emphasis on your credit profile. While checking the eligibility of the borrower for an instant personal loan, the bank will check if the credit score to evaluate if the borrower can repay the loan without any default.

Personal Loan amount:


The personal loan amount depends on your needs. After you decide what amount you need, you can apply for that loan amount from the bank.

Following is a list of personal loan interest rates offered by various banks and NBFCs in India as of August 2018:


Bank/NBFC Name Interest Rate* Bank/NBFC Name Interest Rate*
HDFC Bank Ltd. 10.99% onwards ICICI Bank Ltd. 11.49% onwards
Axis Bank 15.50% onwards Aditya Birla Finance 11.00% onwards
Capital First 12.00% to onwards Citibank 10.99% onwards
Fullerton 12.49% onwards HDB Financial Services 14.99% onwards
IndusInd Bank 11% onwards IIFL 13.49% onwards
IDFC Bank 11.50% onwards Kotak Bank 10.99% onwards
RBL Bank 13.99% onwards Standard Chartered Bank 10.99% onwards
Tata Capital 11.50% onwards

*The above mentioned statistics are as of August 2018. These can change as per the bank/NBFCs policy terms and the loan borrower’s profile.

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