Personal Loan Interest Rates in India -guide

Personal Loan Interest Rates in India – 2022

A Guide about Personal Loan Interest Rates.

A personal loan is one of the financial instruments you can get for yourself. To cover your numerous financial needs, you can get a personal loan. You may easily apply for a personal loan either online or offline from one of the many banks in India that provide the best personal loans to its clients. 

However, you must compare the interest rates provided by various banks, which range from 7.90 percent per year to 49 percent per year, before you apply for a personal loan.The key to a hassle-free personal loan journey is to choose the lender that offers you the lowest interest rates. After all, the rate determines the cost of your borrowing. 

Personal Loan Interest Rate Comparison Chart

LendersInterest Rate (p.a.)Processing Fee (% of loan amount)
State Bank Of India9.8%-13.8%Up to 1.5% (Maximum Rs 15,000)
Bank of Baroda9.20% – 16.55%2% (Minimum Rs 1,000 and Maximum Rs 10,000)
Kotak Mahindra Bank10.99% onwardsUp to 2.5%
Bank of Maharashtra10.35% – 13.70%Up to 1%
Citibank9.99% – 16.49%Up to 3%
Standard Chartered Bank11.49% onwards1%
CASHe27.00% onwardsUp to Rs. 1,200 or 3%
IndusInd Bank10.49% onwardsUp to 3%
Central Bank of India9.85% – 10.05%Up to 1%
IDBI Bank9.50% – 14.00%1% (Minimum Rs 2,500)

Types Of Interest Rates In Personal Loan

There are two main kinds of personal loan interest:-

Fixed or Flat Interest RateReducing or Variable Interest Rate
According to this arrangement, the interest rate on the loan amount is fixed and stays the same for the duration of the loan. It is set by the lender based on assumptions for the average discount rate during the loan term.This is one of the different types of personal loan interest. The variable interest rate on a personal loan fluctuates frequently and follows Reserve Bank of India adjustments to the repo rate. The term “adjustable interest rate” can also refer to a decreasing or fluctuating interest rate.

What Are The Factors That Affect Your Personal Loan Interest Rates?

Interest rates on personal loans are influenced by a number of factors. Although it may differ depending on your lender, these are the most typical ones:-

FactorDetail
Credit scoreIf your credit score is 750 or higher, you have the ability to negotiate a lower interest rate.
Relationship with the lenderThis is another factor that might affect the type and rate of interest on your personal loan. Relationships you already have with the financial institution may make the loan approval procedure simple.
AgeThe applicant’s age is important. The interest rates will undoubtedly be higher for people who are close to retiring.
EmployerYou may have an advantage in obtaining a low-interest personal loan if you work for a reputable or well-known company
IncomeAnother crucial criterion taken into account is the person’s monthly source of income.

How To Get A Personal Loan At Minimum Interest Rate?

The following are important factors to take into account to obtain a personal loan with lower interest rates:

  • Obtain and keep a credit score of 750 or above.
  • Look for deals that banks and NBFCs have already approved.
  • Consult the banks or NBFCs with which you already have loan and/or savings accounts.
  • Keep track of the interest rate reductions that lenders give during the holiday season.
  • Check and compare personal loan offers from numerous lenders by going to online financial markets.

Formula And Methods To Calculate EMI And Interest Rate On Personal Loan?

Equated Monthly Installments, or EMIs, are set payments made by borrowers to lenders each month. This sum will go toward the loan’s principal as well as any applicable interest. The EMI is paid over the duration of the loan that the borrower selects.

Calculation Of EMI Using Excel

Choose a cell in the Excel sheet and insert the following formula there:

=PMT(RATE,NPER,PV,FV,TYPE)

Where,

  1. Rate refers to the loan’s current interest rate.
  2. NPER refers to the total number of monthly payments or loan term.
  3. Present Value, Loan Amount, and Principal Amount comprise the term PV.
  4. Future Value, or cash remaining after the last payment, is referred to as FV. If this is left absent, the value will be considered as zero (0).
  5. Type 0 (numerical 0) or 1 indicates the due date for the payment. The type will be equal to zero if payment is due at the end of the period. The type will be set to 1 if the payment is due at the beginning of the month.

Calculation Of EMI Using Mathematical Formula

The Excel spreadsheet is unfortunately not available everywhere. You can calculate the EMI in this situation using an electronic calculator or your logical math skills. The following equation is used to calculate EMIs:-

EMI is calculated as [P x R x (1+R)N]/[(1+R)N-1]

Where,

  1. P is the loan balance or principal
  2. R denotes the monthly interest rate (if the annual interest rate is 11 percent, the monthly interest rate will be calculated as 11/(12 x 100))
  3. N denotes the number of monthly installments. 

The answer you obtain using the aforementioned method will be the same as the one you obtain using the Excel spreadsheet.

Calculation Of Interest Rate On Personal Loan

Use the IPMT formula in Microsoft Excel to calculate the interest portion of your emi for a specific month or installment. This is the equation: 

=IPMT (rate,per,nper,pv,[fv],[type])

Where,

  1. rate = interest rate. In this case, if you are calculating monthly and the fee is 12 percent annually, you must put 12 percent /12.
  2. per = the installment or month for which you’re figuring up the interest component.
  3. nper = the overall loan tenure (in terms of number of EMIs)
  4. pv=principal/loan amount 
  5. [fv] = The target cash balance at the conclusion of the loan tenure is indicated by this optional field. Usually, this is set to zero.
  6. [type] = this can be 0 or 1 depending on whether the payment is being made at the beginning or at the end of the month.

Balance Transfer Rates To Other Banks

When you exercise a personal loan balance transfer, the interest rates offered by the new lenders are typically lower than those paid by your current lender. Your current outstanding loan balance, loan term, credit score, income, and other factors that make up your credit profile will all affect the interest rate that is given.

Comparison of Personal Loan Balance Transfer Offered by Various Lenders

Banks/NBFCsInterest Rates (per annum)
IndusInd Bank10.49% onwards
Bajaj Finserv13.00% onwards
Kotak Mahindra Bank10.99% onwards
SBI9.80%-13.80%
Axis Bank10.25%  onwards

Processing Fee And Other Charges:-

The following is a list of the fees and charges of the top Indian banks for personal loans:

Name Of BankProcessing ChargesPre-payment ChargesLate Payment Charges
The State Bank of India (SBI)Nil to 1% of the loan amount – on the basis of the loan applied for3% for Xpress Power Loans, Xpress Credit group of loans, and Xpress Pension LoansFor each EMI dishonored – Rs.500 + applicable tax
ICICI BankUp to 2.25% p.a. + GST5% p.a. of the outstanding principal + GST24% p.a. on the outstanding amount from the date of default
IndusInd BankUp to 2.5% of the loan amount + taxSalaried: 4% of the outstanding principal, allowed after 12 EMIs.Self Employed: 4% of the outstanding principal, allowed after 6 EMIsRs.450 + tax
Bank of Baroda2% of the loan amount + tax [subject to a minimum of Rs.1,000 and a maximum of Rs.10,000]2% on overdue amount
Kotak Mahindra BankUp to 2.5% p.a. + GSTLock-in period of 12 months, post 12 months – 5% charges for foreclosure + GST3% per month (compounded monthly)

How Is Prepayment Fee Calculated?

Step 1:- Read the terms of your mortgage loan.:-

Understanding the type of prepayment fee that applies to your loan and whether it is a requirement by default under the terms of the loan is the first step in calculating one.

Check to see if there is a prepayment fee by reading your mortgage contract or other loan documentation. Prepayment fines can take a variety of shapes, including: 

  • a percentage of the remaining principal.
  • a portion of interest that was paid during a specific time frame.
  • a difference in interest points between your interest rate and the going rate on the market, compounded by the amount of outstanding principal.

Step 2 :- Find your outstanding principal:-

The amount you still owe the lender on your loan is called the outstanding principal.

Borrowers gradually reduce their loan principal (unless they are currently in a period of deferment). To calculate the penalty for paying it off early, you will need to know how much you still owe.

Either your most current bill or your initial repayment schedule should include this sum.

The outstanding principal on a loan or mortgage is the sum you are now responsible for paying.

Step 3:- Locate your annual interest rate:-

Assuming that you have a fixed interest rate on your loan, the annual interest rate is a key part of figuring out your prepayment fee.

If you have an adjustable rate, you may need help to calculate your prepayment fee from your lender.

This information is available in your loan contract.

Step 4:-Calculate your prepayment penalty using a percentage of interest:-

Many lenders impose a prepayment fee that is calculated as a percentage of the interest that is paid within a predetermined time frame, often six months.

80 percent of six months’ worth of interest, for instance, constitutes a typical penalty. The interest particularly refers to the percentage of the mortgage payment that is just for interest (the of your monthly payment used to pay interest rather than the principal).

Step 5:- Utilize a percentage of the remaining principal to calculate your prepayment fee:-

Some prepayment fees are calculated using the amount of principal still owed multiplied by a percentage.

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