Personal Loan – Calculator, Eligibility, Interest Rates, Processing Fees, and How to Apply in 2023
This post was most recently updated on August 25th, 2023
Personal loans are one of the most popular and convenient ways to meet your financial needs in India. Whether you want to fund your dream wedding, renovate your home, travel the world, or pursue higher education, a personal loan can help you achieve your goals without any collateral or security. However, with so many lenders offering different types of personal loans, how do you choose the best one for you?
In this article, we will guide you through the process of applying for a personal loan in India, and help you compare the features, benefits, and eligibility criteria of some of the top personal loan providers in the country.
We will also share some tips and tricks to improve your chances of getting approved for a personal loan and how to manage your repayments effectively. By the end of this article, you will have a clear idea of how to get a personal loan in India that suits your needs and budget.
Consider reading: Personal Loan EMI Calculator
Page Contents
Personal Loan Eligibility in India
To be eligible for a personal loan in India, you will need to meet certain criteria, such as having a good credit score and a stable income.
Different lenders may have different eligibility criteria, so it’s important to check with multiple lenders to find the best loan for you.
Here are some common eligibility criteria for personal loans in India:
- Age: Most lenders in India require applicants to be at least 21 years old to apply for a loan, and some may have an upper age limit for loan repayment.
- Credit score: A good credit score is typically required to be eligible for a personal loan in India. Lenders use credit scores to assess the borrower’s creditworthiness and ability to repay the loan. A credit score of 750 or above is generally considered good, although some lenders may have different thresholds.
- Income: Lenders typically require applicants to have a stable income to be eligible for a personal loan. This may include a salary from employment, self-employment income, or income from other sources such as investments or rental property.
- Employment status: Most lenders in India require applicants to be employed or self-employed to be eligible for a personal loan. Some lenders may have specific requirements for the type of employment or business, such as requiring a certain length of employment or a minimum business turnover.
- Residence: Some lenders may require applicants to have a permanent address in India, or to have lived in the country for a certain length of time.
- Documentation: Lenders will typically require applicants to provide documentation to support their application, such as proof of identity, proof of income, and bank statements.
What is CIBIL Score and How Does It Impact Getting a Personal Loan?
CIBIL score is the most important factor in getting any loan. If you don’t have a good CIBIL score then there are chances that your loan request gets rejected or you may have to pay a higher interest rate for your personal loan application.
Here is how a CIBIL score is likely to impact your personal loan application:
| CIBIL Ratings | Credit Score | Chances of being approved for a Personal Loan |
|---|---|---|
| Poor | Less than 600 | You may not qualify for a personal loan |
| Average | Between 600 and 750 | Loan with a low interest rate, faster approval, higher loan amount |
| Good | Over 750 | The loan is likely to be approved with a lower interest rate |
| Excellent | Between 800 and 900 | Loan with a low-interest rate, faster approval, higher loan amount |
From the above table, it’s clear that it’s absolutely critical to have a good CIBIL score not only to be eligible for a personal loan but when you have a good CIBIL score then it helps you get a lower rate of interest.
It’s also important to know that you shouldn’t default on any of your previous loans as if you default on your loans then all the banks can obtain this information via the CIBIL ratings.
If you have an outstanding loan that is defaulted then you may not get a loan at all.
Personal Loan Interest Rates and Processing Fees
Nowadays all the banks are offering attractive interest rates on loans. If you have a good CIBIL rating then that helps you get a very attractive rate on your loan application. Here is the list of banks that offer loans and their interest rates:
| Bank | Interest Rate (p.a.) | Processing Fee |
|---|---|---|
| HDFC Bank | 10.5% p.a. – 21.00% p.a. | Up to 2.50% |
| ICICI Bank | 10.75% p.a. – 19.00% p.a. | Up to 2.50% |
| TurboLoan Powered by Chola | 15% – 21% (fixed) p.a. | 3.00% |
| Yes Bank | 10% p.a. onwards – 24% p.a. | Up to 6.50% |
| Citibank | 10.50% p.a. – 16.49% p.a. | Up to 3% |
| Kotak Mahindra Bank | 10.99% and above | Up to 3% |
| Axis Bank | 12% p.a.- 21% p.a. | 1.5% -2% of the loan amount |
| IndusInd Bank | 10.49% p.a. – 26.5% p.a. | 3% onwards |
| HSBC Bank | 9.75% p.a. – 16.00% p.a. | Up to 2% |
| IDFC First Bank | 10.49% p.a. onwards | Up to 3.5% |
| Tata Capital | 10.99% onwards | Up to 2.75% |
| Home Credit Cash Loan | 24% p.a. – 49.5% p.a. | 0%-5% |
| Ujjivan Small Finance Bank | At the discretion of the bank | At the discretion of the bank |
| Aditya Birla Capital | 14% p.a. -26% p.a. | Up to 2% |
| State Bank of India | 10.65% p.a. – 13.65% p.a. | Up to 1.50% |
| Karnataka Bank | 12% p.a. – 17% p.a. | At the discretion of the bank |
| Bank of Baroda | 10.50% p.a. – 12.50% p.a. | Up to 2% |
| Federal Bank | 10.49% p.a. – 17.99% p.a. | Up to 3% |
| IIFL | 11.75% p.a. – 34% p.a. | 2% – 4% |
| Bank of India | 8.75% p.a. – 13.75% p.a. | Up to 1% |
| Fullerton India | 11.99% p.a. – 36% p.a. | Up to 6% |
| IDBI Bank | 10.25% p.a. – 13.00% p.a. | Contact the bank |
| Karur Vysya Bank | 9.95% p.a. – 12.95% p.a. | 0.30% onwards |
| South Indian Bank | 12.85% p.a. – 20.35% p.a. | Up to 2% |
| Indian Overseas Bank | At the discretion of the bank | At the discretion of the bank |
| RBL Bank | 14% p.a. – 23% p.a. | Up to 3.5% |
| Punjab National Bank | 10.15% p.a. onwards | Up to 1.00% |
| Bank of Maharashtra | 9.25% p.a. onwards | Up to 1% |
| Central Bank of India | 11.75% p.a. onwards | Up to 1% |
| City Union Bank | 9.50% p.a. | 1.00% subject to a minimum of Rs.250 |
| J&K Bank | 12% p.a. – 13% p.a. | Up to 1% of the loan amount subject to a maximum of Rs.10,000 |
Consider reading – 13 safe investments with high returns in India
What are the Fees Charged for Personal Loans in India?
Personal loans in India typically come with various fees and charges, which can affect the overall cost of the loan. Here are some common fees that may be charged for personal loans in India:
- Processing fee: This is a fee charged by the lender to cover the cost of processing the loan application. It is typically a percentage of the loan amount and may vary depending on the lender and loan product.
- Prepayment penalty: Some personal loans in India may have a prepayment penalty, which is a fee charged if you pay off the loan early. This fee is designed to compensate the lender for the interest that would have been earned if the loan had been repaid according to the original schedule.
- Late payment fee: If you miss a loan repayment or make a late payment, you may be charged a late payment fee by the lender. This fee is typically a percentage of the missed payment amount.
- Cheque bounce charges: If a cheque payment for a loan repayment bounces, the lender may charge a fee to cover the cost of the bounced cheque.
- Interest: Personal loans in India typically come with an interest rate, which is a percentage of the loan amount that is charged as a fee for borrowing the money. The interest rate may be fixed or variable, and it can affect the overall cost of the loan.
How to Get a Low-Interest Rate on a Personal Loan
There is cutthroat competition amongst banks to disburse loans these days, and if you are smart, you can negotiate a good deal on your loan. Here are some tips to get the lowest interest on personal loans –
1. Have a good CIBIL score
Having a good credit score (above 800) gives you the upper hand when negotiating interest rates with banks. If you have a CIBIL score of > 800, then you can easily ask for a reduction of 2-3% on the interest rate amount for your loan.
2. Don’t miss repayments of your loans
You should absolutely make sure that you don’t miss any of the repayments for any type of loan you have taken, including your credit card repayments. If you miss a repayment, the bank loses trust in you, and they may not offer the best interest rate that you are looking for.
3. Look out for offers and deals
All the banks come out with attractive offers to lure customers. There is always a deal every 1–2 months on loans offered by banks.
4. Negotiate with the bank
Negotiate with a bank that you are getting a loan at a lower interest rate with a different bank. This will help you get a competitive interest rate.
Types of Personal Loans in India
There are several types of personal loans available in India, including:
- Secured personal loans: These loans require collateral, such as a house or car, to secure the loan. They typically have lower interest rates and longer repayment periods than unsecured personal loans.
- Unsecured personal loans: These loans do not require collateral and are based on the borrower’s creditworthiness and income. They usually have higher interest rates and shorter repayment periods than secured personal loans.
- Personal loans for specific purposes: Some lenders offer personal loans for specific purposes, such as education loans, medical loans, and home improvement loans. These loans may have different terms and conditions than general personal loans.
- Instant personal loans: Some lenders offer instant loans, which can be approved and disbursed quickly, often within a few hours or days. These loans may have higher interest rates and shorter repayment periods than traditional personal loans.
Advantages and Disadvantages of Personal Loans in India
Personal loans can be a convenient and flexible financing option, but they also come with some risks and drawbacks. Here are some advantages and disadvantages to consider:
Advantages:
- Personal loans can be used for a variety of purposes, making them a flexible financing option.
- They offer a fixed interest rate and repayment period, making it easy to budget and plan for the loan.
- Personal loans can be a good option for those with a good credit score, as they may be able to secure a lower interest rate.
Disadvantages:
- Personal loans are unsecured, meaning they carry a higher risk for the lender and may come with higher interest rates than secured loans.
- If you default on a personal loan, it can damage your credit score and make it harder to secure loans in the future.
- Personal loans may have prepayment penalties, which means you may have to pay a fee if you pay off the loan early.
Fixed Interest Rates vs Floating Interest Rates Personal Loans
When you apply for a personal loan you are offered 2 choices:
- Fixed interest rates
- Floating interest rates
When you take a loan at the fixed interest rate you are charged the same interest rate for the entire duration of the personal loan but if you take a personal loan at the floater interest rate then your personal loan will depend on the MCLR (Marginal Cost of Lending Rate).
So what should you choose?
The fixed interest rate is advisable when the interest rate has fallen quite a lot in the last 1-2 years. This will help you lock in the loan at a very cheap interest rate.
If the interest rate has risen quite a lot in the recent past, then it is advisable to take a loan at floating rates so that your loan interest comes down if the MCLR goes down.
What is a Reducing Interest Rate Personal Loan?
A reduced interest rate personal loan is a type of loan in which the interest rate decreases over time as the borrower repays the loan.
This means that the borrower pays a higher interest rate on the initial loan balance, but as the balance decreases, the interest rate also decreases, resulting in lower overall loan costs.
Reducing interest rates Personal loans are often used for long-term financing, such as home loans or car loans. They can be a good option for borrowers who expect their income to increase over time, as they will be able to afford higher loan payments as their income grows.
Things to Consider While Taking a Personal Loan
If you are not careful, a personal loan will dent your finances in a big way, and you will end up paying a lot for your loan repayments.
Here are 5 things to watch out for while taking a personal loan:
- Interest rate: Make sure you get the best interest rate while taking the loan. Negotiate with the bank and ask them to bring down the interest rate.
- Processing fees: Processing fees are hidden elements of any loan. For personal loans, the processing fees are typically 1-3% which is huge You can easily skip paying the processing fees if you negotiate hard with the bank.
- Disbursal time: Nowadays most loans are disbursed in seconds, and you get your money in your bank account instantly. When you apply for the loan check with the bank as to how you will receive the money and how much time it will take to get it.
- Other charges: Please clarify with the bank about other charges while you take the loan. Some banks charge a lot for silly things like late payments/ cheque bounces etc.
- Pre-Closure charges: It’s human nature to close your loans when you have money in hand. You need to watch out for any pre-closure charges that are applicable to your loan. If there are charges, then ask your bank to waive them.
Consider reading How to get out of debt in 5 steps
FAQ on Personal Loan – Calculator, Eligibility, Interest Rates, Processing Fees, and How to Apply
Which bank offers the best interest rate for personal loans in India?
As of July 2023; IDBI Bank offers the lowest interest rate of 9.55% in India.
How can I get a good interest rate?
To get the best interest rate for your personal loan you must have a good CIBIL score > 800 and no loan defaults.
Should I go for the pre-closure of my personal loan?
Be cautious when considering an early personal loan repayment. Often, lenders front-load interest payments into early EMIs, meaning you pay most interest in the initial year. If you repay after this period, you gain little as the interest is already covered. When pre-closing, scrutinize the breakdown of principal and interest payments. If you’re only repaying the principal, pre-closing isn’t advantageous.
What is the difference between a personal loan and a credit card loan? which one should you take?
Credit card loans, which carry an annual interest rate of around 36-40%, are used when you can’t repay your card balance. Personal loans, however, are applied for separately and repaid according to set terms, typically with a lower annual interest rate of 9-16%. Given the lower interest rates, personal loans are usually a preferable choice than credit card loans.
What precautions you should take while taking personal loans?
The proliferation of fintech companies has led to a surge in attractive personal loan offers, some promising instant disbursement. Despite the allure of quick funds, exercise caution when applying for these loans. Their interest rates are often significantly higher than traditional banks. Ensure you carefully review the terms and conditions before applying for any loan.
