Most individuals assume that the best personal loan lender would be the one offering lowest personal loan interest rates. However, the personal loan option in India for any loan applicant would also depend on factors like processing fees, prepayment/foreclosure fees, restrictions imposed on making prepayments/foreclosure, loan tenure, etc. Let us walk you through some of the tips that can help you to avail best personal loan.
Check personal loan offers of banks and NBFCs with which you have deposit, loan or credit card accounts
Most lenders offer preferential interest rates to their existing customers. Therefore, those applicants looking for personal loans should first start by approaching the bank and/or NBFC with which they already have a deposit, credit card accounts and/or has lending relationship. Their interest rates and other personal loan features can therefore be used as a standard benchmark against which the personal loan interest rates offered by other banks and NBFCs can be compared.
Compare interest rates offered by other banks/NBFCs
Personal loan applicants should compare interest rates offered by various banks and NBFCs. Lenders offer differential interest rates to different customers depending on multiple factors such as credit score, monthly income and employer’s profile of the applicant. Some lenders also run special personal loan interest rates offers during the festive season.
List of Best Personal Loans Offered by Various Banks/NBFCs in India
| Banks/NBFCs | Interest Rates(p.a.) | |
| HDFC Bank | 10.50% onwards | Apply Now |
| SBI | 11.00%-15.00% | |
| ICICI Bank | 10.75% onwards | Apply Now |
| Axis Bank | 10.49% onwards | Apply Now |
| Kotak Mahindra Bank | 10.99% onwards | Apply Now |
| IndusInd Bank | 10.49% onwards | Apply Now |
| IDFC First Bank | 10.49% onwards | Apply Now |
| Bajaj Finserv | 11.00% onwards | Apply Now |
| Tata Capital | 10.99% onwards | Apply Now |
Note: Interest rates as of 28 February 2023
Also Check: Comprehensive Table of Personal Loan Interest Rates
The applicants with credit scores of 750 and above have higher chances of getting their loan applications approved and can fetch a lower personal loan interest rate. Lenders usually charge higher interest rate from applicants having lower credit scores. Those failing to meet the cut-off credit scores would have their applications rejected. Thus, ensure to maintain a good credit score by following healthy credit practices like avoiding multiple loan or credit card applications within a short term, repaying credit card bills on their due dates, maintaining a healthy credit mix and fetching credit report at regular intervals.
Compare processing fees and/or admin/login fees charged by various lenders
Banks/NBFCs charge processing fees and/or admin/login fees from personal loan applicants to recover the cost incurred for evaluating and processing their loan applications. As the processing fee can go up to 4% of the loan amount, these fees can constitute a significant proportion of your total loan amount. However, some lenders put a cap on the processing fee amount, regardless of the loan amount and some waive off processing fees during special festive offers. Therefore, applicants should always compare the processing fees and admin/login fees charges levied by various lenders before making the final loan application.
Compare the prepayment/foreclosure charges and restrictions on making prepayments/foreclosures, if any, by various banks/NBFCs
The prospective applicants should check prepayment/foreclosure charges and restrictions on such prepayment/foreclosure, if any, before finalizing lender. RBI regulations have barred banks from charging foreclosure fees on floating personal loan interest rates. Charging foreclosure fees on fixed interest rates are at the discretion of the banks/NBFCs. In some cases, some lenders restrict foreclosure of personal loan until the repayment of a pre-determined number of EMIs.
Check whether the turnaround time for loan disbursement meets your needs
Loan disbursement process depends on multiple factors such as type of loan, loan agreement, upfront payment and processing fees. The turnaround time vary from one lender to another. Banks and/or NBFCs offering end to end online onboarding process tend to have quicker loan disbursal than personal loans offered through offline channels. Some banks also offer pre-approved personal loans with quick disbursal to its existing customers with good credit profile.
Therefore, assessing the approval and disbursal time period is critical as it helps to meet financial objectives as soon as possible. Hence, consider the bank or NBFC which has faster loan disbursal process.
Check whether the tenures offered suit your repayment capacity
Personal loan tenure is inversely related to EMIs. If an applicant opts for a longer repayment tenure, the EMI burden reduces but the total cost of the loan increases as it leads to higher interest cost, or vice versa. Hence, prospective personal loan applicants should choose loan repayment tenure primarily on the basis of their repayment capacity to reduce the chances of defaulting in EMIs in future. Most banks/NBFCs offers loan tenure of up to 5 years, which can go up to 7 years in some cases.
You can use Paisabazaar Personal Loan EMI Calculator to determine your optimum tenure and EMIs based on repayment capacity.
Summing Up – 6 Tips to Choose the Best Personal Loan
Personal loan applicants should not sacrifice their existing investments or monthly contributions meant for achieving critical financial goals for making higher EMI payments. Also, applicants should note that banks/NBFCs prefer to lend to those applicants whose EMI/NMI ratio does not exceed 55%-60% of their monthly income.
The following are the key steps to take before applying for a personal loan:
- Check personal loan offers of banks and NBFCs with which you have deposit, loan or credit card accounts
- Visit online financial marketplaces such as Paisabazaar.com to compare personal loan interest rates & other loan features offered by other banks and NBFCs
- Check whether the tenures offered by lenders suit your repayment capacity
- Compare processing fees and/or admin/login fees charged by various lenders
- Compare the prepayment/foreclosure charges and restrictions on making prepayments/foreclosures, if any, by various banks/NBFCs
- Check whether the turnaround time for loan disbursement meets your needs
FAQs
Q. What is credit score and how does it impact personal loans?
Ans. Credit score is a 3-digit number calculated on the basis of your credit history. Having high credit scores of 750 and above increase the chances of availing a personal loan, at lower interest rates.
Q. Why should I consider foreclosing my personal loan?
Ans. Foreclosing your personal loan can help you reduce the interest cost of your loan. However, factor in the prepayment/foreclosure fees, if any, charged by the lender. Opt for foreclosure/prepayment only if it derives a significant savings in interest cost after factor in prepayment/foreclosure charges.
Q. Which bank is the best for personal loan in India?
Ans. For most, the best bank for availing a personal loan would be the one that offers the lowest personal loan interest rates. However, besides the interest rates, factors such as the repayment period, loan amount, processing fees and time taken for loan approval and disbursal must also be considered while searching for the best bank for personal loan. To make your search easier, visit online financial marketplaces like Paisabazaar.com to check and compare personal loan interest rates along with tenure, processing fees and other associated costs from various banks and NBFCs.