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Personal Loan Interest Rates: When & How They are Affected?

Personal Loan Interest Rates: When & How They are Affected?

Last Updated : May 28, 2021, 9:03 p.m.

If you have already applied for personal loan or in a process of applying then you will surely agree on the fact that the first and foremost thing that you consider is the Interest Rate offered by different banks. Yes, when it comes to Personal Loan, different banks provide you with different interest rates. Once you start comparing some of the leading public and private sector banks, you will find that rate of interest actually depends upon various criteria. Moreover, different banks set different criteria in terms of offering the rate of interest for personal loan. More to the point, whether you are salaried or self-employed, there are certain factors that affect personal loan interest rates. However, if you are also in a process to avail the personal loan , read this article below to get the answers of all your queries. Following are the top 5 factors that affect your personal loan interest rates:


Your income is the first and foremost deciding factor, if you are applying for personal loan. Yes, being an unsecured loan, in personal loan you don't need to give any sort of security to the bank so as to avail this loan. Thus, how the bank will trust you? Well, it can trust you on the basis of your income that you are getting. The more income you have, the more chances for you to avail the loan at lower interest rates. And, bank can rely on you as you can easily repay the loan amount. To give you the personal loan, it's important for the bank to trust on you, and this can only be possible, if your income is above the risk limit.

Your Company Status

The next factor that plays a crucial role in deciding your interest rate for personal loan is the status of your company. As already mentioned, being an unsecured loan, it's not easy for the bank or lenders to trust, thus there are different parameters on the basis of which banks can offer you this loan, and to know the status of your company is one of them. Furthermore, the kind of organization you work with or associated is really important to avail personal loan. Banks define companies in different categories, and depending upon these categories they decide the status of your firm. These categories are as follow: CAT A refers to-Top 1000 companies CAT B refers to-Multi National Companies (MNC's) CAT C refers to-Smaller Companies CAT D refers to-Smaller Companies with 100 Employees If you come under any of these categorizes, it would be easy for you to avail the personal loan. The higher your category is, the more chances for you to avail the loan at lower interest rates. However, if your organization is a start-up and is not categorized in the bank, there are chances that you might get the loan at higher interest rates. So, employees working in start-up firms expect to get the personal loan at high interest rates.

Credit & Payment History

Before deciding to give any sort of loan, banks do follow the credit history/ CIBIL score of every applicant. If you have applied for personal loan and your payment history is not up to the mark, many banks don't consider your profile, and if they do, you will be offered the higher rate of interest. When it comes to CIBIL score, the higher your score is, the better it is for you. CIBIL score ranges between 0-900, and to avail the personal loan banks consider the score above 750. If your score is above 800, you can also expect a drop of approx .25% on your rate of interest to avail the personal loan.

Relationship with Your Bank

In order to get the personal loan at best rate of interest also depends on the kind of relationship you maintain with your bank. If you are having a salary account or savings account, your bank will more likely to offer you the personal loan at special interest rates or processing fee. In order to retain their customers, banks usually offer lower interest rates to those customers who maintain good relationship with the bank. To avail the personal loan, banks generally give special schemes for rate of interest to all their esteemed customers, especially to those who have credit cards or accounts with them. So, maintaining a good relationship with bank can affect your interest rate at availing the personal loan.

Individual Negotiation Skills

If you are having an account in a bank for quite long time, it is quite obvious that you are an esteemed customer of the bank and have maintained the good relationship. Thus, if you negotiate with bank on interest rates, fees, etc, it will surely give you the best deal. Depending upon your negotiation skills, you can ask the bank for special offers, and can enjoy the best deal coming your way for personal loan.


Now, that you know the factors that affect personal loan interest rates, the next step is to know the interest rates offered by different banks. Yes, when it comes to personal loan, it would not be wrong to say that different banks offer different interest rates. Before you finalize or select one bank, it would be advisable to you to compare different banks. So, for your for your reference here is a list of different banks offering Personal Loan:

Bank Name Interest Rates Monthly EMI Tenure Processing Fee Min-Max Loan Amount
Kotak 11.50% - 20% Rs. 5,217 - Rs. 6,086 12 - 60 months Rs.500-2% Rs.50,000 – 20 Lakh
SBI 12.70% - 17.80% Rs.2550-Rs.9177 48 months 2.02%-3.03% Up to Rs 10 lakh
ICICI 13.49% - 17.5% Rs. 5,414 - Rs. 5,823 12 -60 months 0.50% - 2.25% Rs. 20 Lakh
HDFC 13.99% - 22.25% Rs. 5,464 - Rs. 6,328 12- 60 months 1.75%-2.5% Rs.15 Lakh
Bajaj Finserv 15.75% - 16% Rs. 5,642 - Rs. 5,771 12 - 60 months 2% Rs.25 Lakh

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