A Personal loan is a flexible option to fulfil your personal needs when you are in a financial crunch. They should be borrowed for emergency fund requirements. Lenders are coming up with a variety of workable options within personal loans to make them easily accessible for the customers. You can apply for a personal loan either online or in person. But the key point is: how smartly and carefully you choose to approach a lender for a personal loan. 

When a lender sanctions your loan application but with a high interest rate, it would be a bad idea to accept this deal, as this would turn out to be a huge debt during the repayment period because you would be paying the principal amount along with a high interest amount. 

It is also very important to understand the types of personal loans before you approach any bank so that you get the best deal that matches your financial needs.

Types of Personal loans available in India:

  • Marriage Loans

  • Vacation Loans

  • Festival Loans

  • Education Loan

  • Home Renovation

  • Medical Expenses Loan

  • Consumer Durable Loan 

  • Agricultural loan

Finding a personal loan with low interest rate mainly depends upon two important factors:

  1. The lender you approach

  2. Your credit profile

The Lender you approach: Loan offers differ from lender to lender. Each lender follows different criteria to determine interest rates. Therefore, before zeroing down on any lender, it is better to compare the interest rates offered by different lenders around you. This will help you get an idea of the existing market offers and who offers the best deal based on your requirements and eligibility. Also check for other costs, like fees, penalties, early-payoff or any other hidden charges. Lastly make sure you are consulting a trustworthy financial institution.

Credit profile of the customer: The credit profile of a customer gives a full picture of the credit worthiness of a customer. Based on your credit worthiness, the lender decides whether to approve or reject your loan application. And, if approved, the lender will give you a final interest rate and loan amount. This finally approved interest rate could be different from what you may have received as an estimate amount during your prequalification check. This change in amount is based on your credit worthiness that is viewed after completing all your hard credit checks. 

Tips to follow to get a low interest rate on a personal loan:

Keep up a good credit score: A good credit score increases the chances of getting your loan application approved by the lenders. Not only this, the customer is also at a point to negotiate with the lender for discounts and low interest rates. And the lower your credit score, the more likely you are to face a higher interest rate. Therefore, before applying for a loan, improve your credit score with CreditMantri and avoid any rejections by the lender.

Your Credit History: Another factor that determines a low interest rate is by maintaining a good track record of your credit history. Your credit history suggests your credit risk bearing capacity. If you have a good repayment history, you will have a lower credit risk. This means you are most likely to be eligible for a lower interest loan. The higher the credit risk associated with your credit history, the higher the interest rate your offer will likely have.

Building a good relationship with your lender: You can avail some of the best deals and loan offers from a lender with whom you have a good rapport. If you are one of their old customers, the lender knows your credit behaviour and will always try to retain you if you have stayed in best of the terms with the lender. Hence, always try to approach the lender that you have been a customer with for a long time while looking out for low interest loans.

Your income/Job stability: Sometimes lenders are more willing to give you loan if you are working for a reputed company as it defines the customer’s income status and financial stability.

Know the lender’s Interest Calculation Method: Make sure you understand the method by which an interest is calculated by your lender. Never choose a personal loan by only considering its low interest rate. It is very important that you follow the complete loan calculation method of your lender while availing a personal loan. 

There are mainly two methods - A diminishing loan rate and flat rate. A flat rate requires you to pay interest towards the loan amount throughout the entire loan tenure where as a diminishing loan rate requires  payment of interest towards the outstanding balance only.

Banks offering some of the best Personal Loan Interest Rates 2019

 S.No   Bank Name  Interest rate (p.a) 
1  Yes Bank  Starting at 10.75%
2  HDFC Bank  11.25% - 21.50%
3  ICICI Bank  10.99% - 18.49%
4  SBI  11.00% - 15.40%
5  Standard Chatered  11.50% - 18.00%
6  Axis Bank  16% - 24.00%
7  Induslnd Bank  10.99% - 16.00%
8  Bajaj Finserv  10.99% - 16.00%
9  Citibank  10.99% - 18.99%
10  Kotak Mahindra Bank    10.99% - 20.99%


Additional Reading: 6 Smart Tips to Get Low Interest Home Loans