A personal loan is an unsecured loan provided by a bank or any financial organization. The maximum loans taken in the economy are personal loans. These are accessible to the working class and to lower-income groups. The availability of the loans is easy and thus a large part of the economy is using this facility for purchases and any immediate requirements for individuals and their families.
Interest rates for personal loans are the highest and thus one needs to be cautious as to what loan they are obtaining, the interest rate, the tenure and also the charges. The loans with cheaper rates and shorter terms are favourable for individuals. Strong credit history will help you to borrow a personal loan easily with minimum documentation to be done.
Let us look at some banks which provide the lowest interest rates
| Bank name
Central Bank of India Bank of Baroda Bank of India Bank of Maharashtra HSBC State Bank of India IDBI Bank HDFC Bank Indian Overseas Bank ICICI Bank |
Interest rate
8.45% 9.10% 9.35% 9.45% 9.5% 9.6% 9.5% 10.25% 10.25% 10.5% |
How to Avail Loan at the Lowest Rates
- Always compare the interest rates before selecting any personal loan. The lowest rates can be compared on many online platforms on the internet.
- A good credit score will always fetch you the eBay possible offer in the market
- Keep looking for festive offers in specific seasons and avail of those offers for low-interest rates
- Check for loans that are already approved by banks or financial institutions. These will help you get a low-interest rate deal
- For selecting a personal loan, always prefer banks or financial institutions wherein you already have an account, and less documentation will be required. This may help you to get a low-interest rate loan as the history is already known by the lender and no verification is required.
Factors that Affect the Interest Rates
A credit score of 750 and above is considered a good credit score and thus becomes a prime factor for deciding the factors related to lending the loan. Try to maintain healthy financial habits such as paying EMIs and credit card bills on time and avoiding multiple loans and credit card applications within a short period of time.
The other factor is also the relationship with the lending party. If the lending party is already known and they have the information related to the borrower, they may make an extra effort to lend the loan at lower rates.
The income earned by an individual states that his eligibility to avail of the loan is higher. This in turn states that the individual has a higher capacity to pay the instalments of the loan amount. Thus, the higher income group will have a reduced credit risk. Due to this a lot of lenders may provide loans to these customers at lower rates.
The lenders in the market also consider the employer profile when lending the loan to individuals. The employer’s high earning capacity makes employees better at taking risks as they are reimbursed by the former. The credit risk is low in the case of such employers. A lot of government and PSU employees are given loans at lower rates due to stability of income and low credit risks. It is considered that these will have a low impact in case of any economic downturn and thus they can stand this risk.
Things to Consider While Selecting a Loan
The loan interest rates might be low but the charges along with the interest rates are levied and one should check and be aware of these charges before selecting the loan. The processing fee is one such transaction that needs to be verified.
Some of the banks will charge a fee and will provide a specified time till when the pre-closure will not be allowed. The borrower should check these charges before selecting the loan
A lot of banks will provide discounts to their existing customers and thus the interest rates can be negotiated for these banks.
The banks also provide extra discounts in case of festivals or an achievement milestone by bank. The borrower can avail of these offers.
If you are applying for a loan for emergency purposes, then the loan disbursal time is also one factor that you need to evaluate before you choose the loan.
The eligibility criteria for different banks and institutions change and the borrower needs to be aware that even though they select a particular loan, they should be eligible for it
Customer service is an important aspect when it comes to availing a loan. The banks can be of great help in the process of documentation and disbursement.