The interest rate of a personal loan has a major influence on its borrowing cost. Increase in personal loan interest rates will not only increase the monthly payments but also the interest cost. Therefore, those planning to avail personal loans should try to avail them at the lowest interest rate possible. To help consumers with the same, here are a few simple tips:
Compare Offers from Multiple Lenders
Personal loan interest rates offered to a loan applicant might vary across banks and NBFCs due their varying credit risk factors and loan evaluation process. Thus, to get the best possible interest rate on a personal loan, consumers should compare offers from as many lenders as they can and then apply for the one that best matches their loan requirements.
Personal Loan Interest Rates of Top Banks and NBFCs
| Lenders | Interest Rates (p.a.) |
| State Bank of India | 10.55% – 14.55% |
| HDFC Bank | 10.50% onwards |
| Bank of Baroda | 10.10% onwards |
| ICICI Bank | 10.65% onwards |
| Punjab National Bank | 10.40% – 16.95% |
| Axis Bank | 10.49% onwards |
| Union Bank of India | 11.40% – 15.50% |
| Bajaj Finance | 11.00% onwards |
| Tata Capital | 10.99% onwards |
| Bank of India | 10.25% – 14.75% |
Source: Paisabazaar Website
Check with Banks or NBFCs with whom you have an Existing Relationship
Banks and NBFCs tend to offer preferential interest rates to their existing customers. Thus, consumers looking for the lowest personal loan rates should check with the banks and NBFCs from whom they avail banking products and services. Many lenders also extend pre-approved personal loan offers to their existing customers. Such pre-approved offers are usually offered to customers having excellent credit profiles and therefore, the interest rates offered on them might be lower than the interest rates set for other individuals.
Keep your Credit Score as High as Possible
Banks and NBFCs offer lower interest rates to those having credit scores of 750 and above. This is because such loan applicants tend to have greater credit discipline and thus pose lower credit risk to banks and NBFCs. Consumers having lower credit scores, on the other hand, carry higher risk for lenders. Therefore, lenders either reject their loan application or charge higher interest rates.
As the need for a personal loan can arise anytime, consumers should keep working towards improving their credit profiles and credit scores. For this, they should regularly check their credit scores and if found low should take the necessary steps to improve it such as paying their EMI and credit card bills on time, avoiding making multiple loan applications within a short span, etc.
Consumers should also check their credit reports from all credit bureaus regularly to timely identify incorrect details or fraudulent activities in their names. If they find such an issue, it should be immediately reported to their respective lenders and credit bureau for correction. A rectified credit report might increase their credit scores.
