A personal loan is a type of loan that does not require any security or collateral compared to the other secured loan types. They are generally used for emergencies, purchases of a large scale, investment in a business, etc. In the current market scenario, the Personal loan 2021 interest rates are comparatively higher than other types of loans such as a Home loan or a Car loan.
Personal loan 2021 interest rates can be reduced to an affordable number when the credit score of the applicant is high, which implies accountable and timely payment of the equated monthly instalments. It is best to check the bank rates as they vary from one to the other. You must compare personal loan interest rates to figure out which one is the most feasible and affordable in the long run.
Personal loans are offered at a starting interest rate of 10% with some banks offering an even lesser percentage of around 8%. The processing fee ranges up to 1.5% and the loan period is of 1 to 5 years. Here is a list of the banks offering the most basic rates so you can weigh your options before choosing this type of loan:
- HDFC Bank: 10.50% – 21%
- ICICI Bank: 10.50% – 19%
- IDFC First Bank: 10.49% – 18%
- SBI: 9.60% – 15.65%
- Yes Bank: 10% – 24%
- HSBC Bank: 9.99% – 14%
- Axis Bank: 10.49% – 24%
- PNB Bank: 8.45% – 14%
- Federal Bank: 10.49% – 17%
- Bank of Baroda: 10% – 15.60%
- Central Bank of India: 8.85% – 10.20%
- Indian Bank: 9.05% – 14.65%
- UCO Bank: 10.30% – 10.55%
- Bank of India: 10.35% – 12.35%
- IDBI Bank: 9.50% – 14%
Before comparing interest rates between different banks, it is important to know a few things to ensure that the loan borrowing process turns out to be a hassle-free experience in the long run.
Types of Interest Rates
There are two types of interest rates – Fixed Interest rates and Floating Interest rates.
Fixed Interest Rates
Fixed interest rates are independent of economic fluctuation in the financial market. This type of interest rate is usually 1 to 2% higher than the floating ones. Fixed interests are more preferable to customers because the rates assure a sense of security as the Equated Monthly Installments are known beforehand. The time period of loan repayment also remains the same. However, fixed interest rates do not provide a reduced interest rate when the initially agreed upon rate gets altered due to market conditions.
Floating Interest Rates
Floating interest rates, on the other hand, are rates of interest that are quarterly revised. So the interest rates on a loan amount are subject to change as per the regulations of the Reserve Bank of India and will be levied upon the amount of loan that has been borrowed. Changes of any type in the floating interest rate do not directly affect the EMIs of the borrower. Instead, the time period of the loan will change as per the bank policy. According to the guidelines mandated by RBI, lenders are not permitted to charge any prepayment amount on loans taken on floating interest rates.
Factors to keep in mind before finalising a personal loan interest rate
Here is a brief list of tips to consider before getting a personal loan interest rate finalised:
- Inquire about the additional costs apart from interest such as processing fees, prepayment fees and penalty charges in case of late EMI payment.
- Approximate evaluation of EMI payment capacity to avoid cash crunch and payment default is necessary. Having a precise amount or an approximation figured out is always the best option.
- A thorough comparison of interest rates across different banks is mandatory.
- Having a high CIBIL score or working towards building a good score as per bank requirements is a great thought.
- Decline additional offers like premium insurance schemes that require monthly payment accompanied by the EMI amount.
- Check up on the customer transactions of a bank. This works best in case a colleague has availed a loan from that source before. That provides an insight on how efficient the bank is in the loaning process apart from providing reasonable rates.
As much as it is essential to compare the interest rate between different banks to get the lowest interest rate possible, it is important to keep some factors in mind that will increase the chances of loan approval. It is good to build a rapport with your account manager. The second and important factor is having a good credit score. It is needless to say that this will have the top-notch banks approving your personal loan application at a low-interest rate and will also help clear the dues faster.