Personal Loan Interest Rates 2026

When apply for a personal loan, one of the key decisions you’ll need to make is whether to choose a fixed or floating interest rate. Understanding each type of interest rate can help you make an informed decision based on your financial goals. Here is an overview of both options:

Fixed Interest Rates

In case of fixed interest rate personal loans, as the term implies, the interest rate remains the same for the entire loan tenure. As a result, your EMIs remain constant and therefore easier for borrowers to plan their budget. However, fixed rate loans usually come with a higher spread than floating rates.

Floating Interest Rates

In case of personal loans availed at floating interest rates, the interest rate fluctuates over time based on changes in the linked benchmark rate (repo rate). Note that the EMIs would increase only in the case of floating rate personal loans availed with the ‘EMI change’ option. In this case, the tenure would remain the same irrespective of the changes in the interest rates. In case of floating rate personal loans availed with ‘tenure change’ option, the EMI would remain the same while the tenure would change as per the changes in the interest rates.

Banks and NBFCs primarily set personal loan interest rates based on the cost of funds and the credit risk evaluation of their loan applicants. Here are the factors affecting personal loan interest rates:

Here are 5 tips you can follow to improve your chances of get a personal loan at a lower interest rate:

Personal loan tenures usually range from 1 to 5 years with some banks and NBFCs offering longer tenures of 6, 7 or 8 years. The choice of loan tenure directly affects the borrower’s EMIs and total interest cost. Opting for a longer tenure lowers loan EMIs, making repayment easier for borrowers having limited repayment capacity. However, this convenience comes at the cost of incurring higher interest costs. Borrowers who choose longer tenures can reduce their total interest cost by making prepayments, whenever they have surplus funds. Personal loan applicants should opt for shorter tenures only when they have adequate repayment capacity for the EMIs.

Let’s Take an Example: Rs 5 Lakh Loan EMI Across Tenures

Below is the EMI, total interest cost and total amount payable for different tenures of a personal loan of Rs 5 lakh at an interest rate of 11.50% p.a.

Analysis:

• Choosing a longer tenure lowers your EMI, making monthly repayments more manageable. For instance, EMI reduces from Rs 44,308 (1-year tenure) to Rs 10,996 (5-year tenure).
• But, longer tenure comes at a cost as it significantly increases the total interest cost over the repayment period. For example, with a 5-year loan, you pay Rs 1.59 lakh in interest, which is over 5 times more than the Rs 31,690 paid on a 1-year loan

Key Takeaway

If you have adequate repayment capacity, you can opt for shorter tenures to save on overall interest cost.  But if you are not able to manage higher EMIs or have limited repayment capacity, you can opt for longer tenures and consider prepaying your loan when you have adequate funds, keeping aside emergency funds.

Scenario:

Mr. Vinay Prasad was planning to take a Rs. 5 lakh loan to fund his son’s higher studies for 5 years. He had an existing salary account with IndusInd Bank and a savings account with Federal Bank. But before accepting an offer, he came to Paisabazaar and compared offers from various lenders. Here, he found out that he had an existing pre-approved offer from HDFC Bank at an interest rate of 9.99% p.a.

*Interest rates from lending partners as on 23rd October 2025.

Insights:

1. Compare multiple lenders: Banks, NBFCs, and fintech lenders offer different interest rates for the same loan amount.
2. Small difference in interest rate matters: Choosing HDFC Bank (9.99%) over Bajaj Finserv (13.5%) saved Vinay over Rs. 53,000 in interest.

How Paisabazaar Helps You Make Informed Borrowing Decisions?

Why Compare Personal Loan Rates on Paisabazaar?

Personal Loan Balance Transfer (PLBT) allows existing borrowers to transfer their outstanding loan balance from one lender to another at a lower interest rate, for a longer tenure and/or for better terms and conditions. The interest rate offered by the new lender would depend on the borrower’s credit score, income, existing outstanding loan amount, tenure and other aspects of their credit profile.

Borrowers should note that there are certain nominal charges, such as foreclosure charges and loan transfer fees payable to their existing lender. Additionally, the new lender may charge a processing fee, stamp duty and other fees that are associated with a fresh loan application. Therefore, it’s important to carefully evaluate whether the savings on interest from the balance transfer will outweigh these associated costs.

Comparing interest rates before applying for a personal loan is important, as even a slight difference can lead to significant savings over the repayment tenure.

Among the leading private sector banks, Kotak Mahindra Bank offers the lowest interest rates on personal loans starting at 9.98% p.a., closely followed by HDFC Bank offering personal loans at 9.99% p.a. onwards. Some public sector banks may offer lower interest rates. However, the final interest rate offered will depend on factors such as credit score, monthly income, occupation profile, etc.

Here is a list of the latest MCLR (Overnight) for some top lenders in India

*Overnight MCLR as on 8^th Jan, 2025

Step 1: Download the personal loan app from the Google Play Store or the Apple App store

Step 2: Sign in by filling in the required details (including PAN)

Step 3: Verify your phone number and email address using the OTPs received

Step 4: Click on the “Personal Loan Icon”

Step 5: Select your employment type and income range

Step 6: A list of eligible offers will be displayed ranked in order of chances of approval

Step 7: Choose from the list the best-suited offer and apply

RBI monetary policy and its liquidity maneuvers can directly impact the cost of funding for the banks/NBFCs, which in turn will impact the interest rates for fresh borrowers. These will also impact existing borrowers who have availed loans at floating interest rates, subject to their interest rate reset date set by their lenders. However, these policy changes will not impact the interest rate of fixed rate personal loan borrowers as their interest rate will remain unchanged for their entire loan tenure.

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