For just about every reason, like debt consolidation, unexpected expenses bill, a holiday, and so on, a personal loan can be your only perfect partner. Usually, for two or five years, with payments in annual installments a personal loan can be reimbursed. Personal loans are also widely called unsecured ones as they are not backed by collateral. To apply for a personal loan, there are several points to follow, but choosing the perfect one that suits your needs with a low-interest rate is the smart strategy here. And taking the same into account, public sector banks tend to drive the way by attempting to offer cheaper interest rates on loans across segments relative to the leading private sector banks of India. Here we have taken the cheapest interest rates on personal loans of Rs 5 lakhs that are currently being provided by leading banks of India.
Tips to get a personal loan at the lowest interest rates
Below are the few considerations that you can follow to get the lowest interest rates on a personal loan while applying for it:
- Strong credit history plays an important role while applying for a personal loan. Banks and financial institutions support borrowers who have a good credit score with the lowest personal loan interest rates. Therefore, before applying for a personal loan, you must review your credit score. You should look at options to boost your credit score if it is less than 750. If your credit score is above 750, there are more possibilities for you to have a personal loan at the cheapest rate.
- Your credit score can be negatively impacted if you miss a loan or credit card reimbursement. Typically, lenders take the debt history into consideration before agreeing on the interest rates for a personal loan. A lower interest is usually applied to those who have paid their previous EMIs and credit card payments on or before the deadline.
- During festive times, banks and financial institutions typically give attractive interest rates for a short period. So it is considered to apply for a personal loan during a festive season to get the lowest rates.
- There is a need to compare the personal loan interest rates provided by different NBFCs and banks before applying to a specific bank for a personal loan. It will enable you to take advantage of a personal loan at a reasonable interest rate.
- You can receive the lowest interest rate if you are a current customer of a bank or have a positive relationship with the lender.
Factors that influence personal loan interest rates
- When determining the interest rate, loan providers consider the income stream of the individual first. Individuals with a high salary can get a personal loan at the lowest possible rate.
- Lending institutions can give borrowers different interest rates depending on whether they are self-employed or salaried individuals.
- The individual's age may also have an effect on the interest rate provided by the lender. A higher interest rate can be charged to individuals who are entering the retirement age.
- At the time of applying for a personal loan, current customers of a bank/financial institution may be given a lower interest rate, provided they have a strong relationship with the issuer of the loan.
Facts to consider while applying for a personal loan
There are a few other considerations to keep in mind while choosing a personal loan with a low-interest rate and they are:
- A one-time charge known as the processing fee is charged by loan providers and just because a low interest is paid to you, the transaction fee charged by multiple lenders must be reviewed and compared.
- If you repay the unpaid loan balance before the expiration of the loan repayment period, some banks may bill you a pre-closure fee. Thus, whether a pre-closure fee is charged by the bank/financial institution you are applying to is must be checked.
- You must review the customer service networks that are open before submitting your loan application and how responsive the provider is to support you when requested.
- Although personal loans at low-interest rates may be offered by a bank or financial institution, you should make an effort to verify whether you follow the eligibility rules stated by the lender. You must confirm that you verify whether your salary meets the defined cap and whether you follow the stated age criteria for this reason.
- If you are applying for a personal loan because of an emergency, it is necessary to consider the duration of the disbursement of the loan.
- Although the lender can bill you a marginally higher interest rate, the processing fee, default charges, prepayment fee, Loan Cancellation Fee, Stamp Duty Fee, Duplicate statement fee and so on are the charges that you must check.
Personal Loan Interest Rates
The cheapest personal loan is provided by Union Bank of India at a rate of 8.9% per annum, followed by Punjab National Bank at 8.95%. The Federal Bank and HDFC Bank, the higher on the below table cost 10.49 per cent and 10.5 per cent respectively across private sector banks. The interest rate obtained from the websites of the respective banks as of February 4, 2021. Banks are classified on the grounds of interest rate in increasing order, i.e., banks providing the cheapest interest rate are put at the top and the highest at the edge. Based on the terms and conditions of these banks, the interest rates listed below can differ. As an applicant, if your credit history is poor you may be paid a much higher rate based on certain aspects, such as your salary, profession and age.
|Sr No.||Banks||ROI in % p.a.|
|1||Union Bank of India||8.90|
|2||Punjab National Bank||8.95|
|3||Central Bank of India||8.95|
|5||Bank of Maharashtra||9.55|
|8||Bank of Baroda||10.10|