It would be wise to borrow from a lender offering relatively low rates with shorter terms because personal loan interest rates are among the highest (the longer the term, the higher the interest). Banks also offer customers with exceptional credit ratings the lowest interest rates.
Banks offering the lowest interest rates for personal loans
| BANKS | Personal loan amount | Mandate | Return on investment (%) |
| IDBI Bank | >=25000 and | 12 – 60 months | 8.90% – 14.00% |
| National Bank of Punjab | Up to 10 lakes | Up to 60 months | 9.35% – 15.35% |
| Indian bank | >=50000 and | 12 – 36 months | 9.40% – 9.90% |
| Karur Vysia Bank | Up to 10 lakes | 12 – 60 months | 9.40% – 19.00% |
| National Bank of India | >=25000 and | 06 – 72 months | 9.80% – 12.80% |
ETIG compliant; data as of June 23, 2022
Fixed or floating interest rate
When applying for a loan, it should be confirmed with the lender whether the interest rate granted is fixed or floating. Changes to the bank’s MCLR will not affect your monthly equivalent payment (EMI) amount if the interest rate is fixed. Also, keep in mind that since personal loans are unsecured, their interest rates are usually significantly higher than those applied to home loans or loans secured by gold.
Who offers the personal loan
While one can apply for a personal loan from friends and family, lending organizations like banks and non-bank financial companies (NBFCs) offer personal loans in a more organized, “on-demand” format. In addition to NBFCs like Tata Capital and Bajaj Finserv, banks like State Bank of India (SBI), HDFC Bank also offer personal loans.
Personal loan fees
A bank or NBFC will charge processing fees, stamp duties, and other legal fees when you apply for a personal loan. Each lender has a different set of fees.
Additionally, a lender has the right to collect pre-closing or early payment fees. Check the various fees that may be imposed before accepting a loan from the lender.
Duration of personal loans
Credit institutions such as banks often grant personal loans for a maximum period of five years. However, the duration may differ from one lender to another.
Important Personal Loan FAQs According to SBI
1. What are my loan limits?
A. Minimum loan amount: –
Term loan: Rs 25,000
Overdraft: Rs 5.00 lacs: Overdraft will be subject to a monthly reduction in drawing power so that the drawing power becomes NIL in 72 months
B. Maximum loan amount: –
Rs 20.00 lacs subject to 24 times Net Monthly Income (NMI) and applicable EMI/NMI = 50% for all categories [except employees of Govt. Aided Schools where it is 12 times Gross Monthly Income (GMI)]
2. What important documents do I need to provide?
A. You will need to provide only the following documents with the loan application form:
Latest passport size photographs – 2
Copy of identity card issued by the employer
Bank account
Salary slip for the last 6 months or last form 16 (in case of beneficiary of income tax)
(a) Permanent Account Number (PAN).
(b) At least one copy of the Officially Valid Documents (OVD) mentioned below, as proof of identity and current domicile:
I. Passport
ii. Driver’s license
iii. Proof of possession of Aadhaar number
iv. Voter Identity Card issued by the Election Commission of India
v. Work card issued by NREGA duly signed by a state government official
v. Work card issued by NREGA duly signed by a state government official
vi. Letter issued by the National Population Registry containing name and address details
3. Do I need to provide some form of warranty?
A. No collateral is required.
4. What is the repayment schedule?
A. The maximum repayment period is 6 years or the remaining period of service (whichever is lower).
