Personal Loan Interest Rates In India: What Determines Your Loan Cost
Personal loans are typically taken to fulfil urgent personal financial obligations. These can be medical expenses, education, and emergencies. But the total cost of borrowing depends on the personal loan interest rates.
A small change in personal loan interest rates can increase the total cost of borrowing. For instance, if the loan amount is ?5 lakhs and the interest rate is 10%, it will be less compared to the same loan amount and interest of 14%. The total credit of the population is increasing. According to the Bank for International Settlements, it is close to 60% of the GDP.
Personal loan interest rates in India as of March 2026 vary from bank to bank. Bank of Maharashtra’s interest rates on personal loans are as low as 8.75%, whereas Kotak Bank’s interest rates on personal loans are 9.98%, HDFC Bank’s interest rates on personal loans are 9.99%, and ICICI Bank’s interest rates on personal loans are slightly higher than 10%.
Personal Loan Interest Rate (March 2026)
Below is a comparison of indicative personal loan interest rates offered by major banks in India.
| Bank | Personal Loan Interest Rate (per annum) |
| Bank of Maharashtra | 8.75%-13.55% |
| Kotak Mahindra Bank | 9.98% ownwards |
| HDFC Bank | 9.99%-24% |
| ICICI Bank | 9.99%-16.50% |
Source: Piasa Bazaar1, Liveintmoney2
Disclaimer: Rates are indicative and may change depending on borrower profile and bank policies. Final interest rates are determined after evaluating credit score, income, and repayment capacity.
What Is a Personal Loan Interest Rate?
In a loan, you are given a certain amount of money by the bank, and in return, you have to pay a certain rate of interest, called the personal loan rate of interest. The higher the personal loan interest rate, the higher your loan repayment will be. The lower the personal loan rate of interest, the lower your loan repayment will be.
Knowing the personal loan rate of interest will help you choose a better personal loan.
Fixed vs floating interest rates
Feature | Fixed Interest Rate | Floating Interest Rate |
Interest Rate | Remains the same during the loan tenure | Changes with market conditions |
EMI Amount | Stays constant | May increase or decrease |
Risk Level | More predictable | Can fluctuate |
Best For | Borrowers who prefer stability | Borrowers willing to accept rate changes |
How EMI is calculated
The amount that you pay each month is called an EMI, which is an abbreviation for Equated Monthly Instalment. The banks may provide a personal loan EMI calculator.
The personal loan EMI formula is as follows:
EMI = P * R * (1 + R)^n / ((1 + R)^n - 1)
Where:
P = Loan Amount
R = Monthly rate of interest
N = Loan tenure in months
Example: Suppose you take a personal loan of ?5 lakhs for a period of five years with a personal loan interest rate of 10%. The personal loan EMI will be approximately ?10,624 per month, as calculated by a personal loan EMI calculator. This example indicates how personal loan interest rates affect your monthly personal loan repayment.
Factors That Affect Personal Loan Interest Rates
The banks do not charge the same rate for all borrowers. Your financial information is reviewed by the lenders before they determine the rate. The personal loan interest rates are affected by several factors. Knowing them will help you get a better deal.
1. Credit score
Your credit score is one of the most important factors. It reflects your history of timely loan repayment. A high credit score reflects that you have been paying your loans on time. This is considered less risky by banks.
Consequently, banks can offer lower interest rates on personal loans. On the other hand, those with lower scores can be offered higher rates.
2. Income stability
Additionally, your income and stability of employment are considered. Having a steady income minimises risk for banks. For salaried individuals with a steady income, you can get the lowest interest rate available for salaried individuals. For self-employed individuals with variable incomes, you may be able to get a slightly higher interest rate.
3. Loan tenure
Loan tenure also impacts the interest rate charged on a personal loan and the total cost incurred in repaying the loan. If the tenure is short, the total interest incurred is reduced. However, the EMI is high. If the tenure is long, the EMI is low, and the total interest incurred is high. Therefore, the tenure is an important factor in planning a loan.
Personal Loan Rates Across Banks
The personal loan interest rate varies from one lender to another. The rate is finally decided based on the lending policy of the bank and the borrower’s profile.
- Public vs private banks
The personal loan interest rate of public sector banks is slightly lower. Their lending policy is less risky. For instance, the personal loan rate of the Bank of Maharashtra is 8.75%. This is a lower rate compared to others. Private banks may charge a slightly higher rate, but they will give a quick response to the loan.
- NBFC lending rates
Non-banking financial companies (NBFCs) also offer personal loans. They tend to offer loans to more people. However, the interest rates charged on personal loans by NBFCs tend to be higher compared to banks. This is because they offer loans to people who have low credit ratings. Despite the higher interest rates charged on personal loans by NBFCs compared to banks, they offer flexibility and convenience.
Tips To Get Lower Personal Loan Rates
Personal loans are easy to obtain. However, the cost depends on personal loan interest rates that are provided by the lending institution. Some steps can be followed to secure low personal loan interest rates.
- Improve credit score
A credit score is a major factor that determines personal loan interest rates. Lenders consider a higher credit score as a sign of responsible personal loan takers. It is advised that you maintain a credit score above 750.
You must pay your credit card bills on time. Avoid missing your EMI payments. Reducing your existing debts is also a great idea. A better credit score will allow you to secure low personal loan interest rates from banks.
- Compare lenders
The personal loan interest rate varies from bank to bank or non-banking financial company. Even a slight variation in personal loan interest rates can result in a higher amount to be repaid. While applying for a personal loan, it is advisable to check personal loan interest rates from various banks and non-banking financial companies. A proper personal loan rate comparison will help you find a competitive rate.
It is also important to check other charges that banks may levy as a personal loan processing fee. Being a responsible borrower is also important. Availing a loan according to your repayment potential is necessary to maintain financial stability.
Things To Check Beyond Interest Rates
While comparing personal loan interest rates, borrowers should also review other charges and loan terms that affect the total borrowing cost.
1. Processing fees: Banks may charge 1% to 5% of the loan amount as a processing or administrative fee.
2. Prepayment or foreclosure charges: Some lenders charge a penalty if you repay the loan before the tenure ends.
3. Late payment penalties: Missing an EMI may lead to additional charges and can negatively affect your credit score.
4. Loan tenure flexibility: A longer tenure lowers the EMI but increases the total interest paid.
5. Other charges: Check for documentation fees, EMI bounce charges, and prepayment conditions before finalising the loan.
Reviewing these factors along with personal loan interest rates in India can help you select a loan that fits your repayment capacity and long-term financial plans.
Conclusion
Personal loans may be useful in managing sudden expenses and planned purchases. Nevertheless, the total cost is dependent on the interest rates for a personal loan. It is crucial to note that a small difference in the interest rates for a personal loan may impact the total cost. Therefore, it is vital to compare the interest rates for a personal loan from different lenders.
The factors affecting the interest rate for a personal loan, such as credit scores, stable income, and tenure, are crucial in decision-making. It is also vital to balance debt with smart investments. For example, Grip provides investment opportunities.
To invest better in a secure, explore Grip Invest!
FAQs
1. What is the average personal loan interest rate in India?
The average interest rates charged on personal loans in India range from 9% to 18%. The interest rates charged on personal loans are dependent on the lending institution, the credit score of the individual, their income levels, and the tenure of the loan. Public sector banks may charge slightly lower interest rates on personal loans in India. However, private banks may charge slightly higher interest rates on personal loans.
2. How can I reduce my loan interest rate?
The interest rates on personal loans can be lowered by improving the financial position. A good credit score is essential. Comparison of lenders is also important. Most applicants use a personal loan EMI calculator to calculate the amount and select the loan amount and tenure.
3. Do credit scores affect loan rates?
Yes. Credit scores have a significant impact on the interest rates of personal loans.
Borrowers with higher credit scores are considered less risky. Banks offer them lower interest rates and faster loan processing. Borrowers with lower credit scores may be offered higher interest rates or loan conditions.
References:
1. Piasa Bazaar, accessed from: https://www.paisabazaar.com/personal-loan/interest-rates/?utm_
2.Liveintmoney, accessed from: https://www.livemintmoney.com/personal-finance/loans/personal-loan-these-are-the-latest-interest-rates-charged-by-top-banks-in-feb-2026-281770717963406.html?utm_
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