Loans have become an inevitable part of our lives. Be it for professional, business or personal reasons, there is the constant need for meeting financial exigencies which makes loans such an invaluable necessity. 

Personal loans are a type of unsecured loans which are collateral free. The interest rate on the personal loan availed is the most important component that determines the overall loan cost. As such, a low interest offered means lower EMIs and lower interest pay-out over the tenure of the loan. Let’s check out the top 10 banks in India that offer personal loans at the lowest interest rates in 2021.  

Top 10 Banks Providing Lowest Personal Loan Interest Rates in India


Rate of Interest (p.a.)

Loan Amount (Rs.)

EMI/per lakhs (1 year)

UCO Bank

Starts from 8.45% 

Up to 10 lakhs


Central Bank of India

Starts from 8.45% 

Up to 20 lakhs


Union Bank of India

Starts from 8.90% 

Up to 15 lakhs


Punjab National Bank

Starts from 8.95% 

25,000 to 15 lakhs


Indian Bank

Starts from 9.05% 

As per the applicant’s profile


Bank of India

Starts from 9.35% 

Up to 10 lakhs



Starts from 9.50% 

25,000 to 5 lakhs


Bank of Maharashtra

Starts from 9.55% 

Up to 20 lakhs


State Bank of India

Starts from 9.60% 

Up to 20 lakhs



Starts from 9.75% 

Up to 30 lakhs



Factors Influencing Personal Loan Interest Rates


  • The applicant’s income is taken into account while calculating the personal loan interest rate.
  • A stable income generates lower interest rates and vice versa.

Employer Particulars

  • Working with a reputed employer/organization entails a lower rate of interest as banks consider such applicants a low-risk category.

Employment Type

  • Salaried or self-employed individuals are offered different rates of interest.


  • The age of the applicant is a key consideration while deciding the eligibility for the loan.
  • Applicants nearing the retirement age may be charged a higher rate of interest and those who are having a stable income and are middle-aged may be charged a lower rate of interest.

Relationship with Lender Bank

  • The relationship with the lender goes a long way in deciding the rate of interest.
  • Customers with a good relationship with the lender tend to get personal loans at a low rate of interest. 
  • Existing customers with a good debt repayment record with the bank get favoured by banks for availing of personal loans at a low-interest rate.

Credit History and Credit Score

  • Credit history based on the credit report and credit score are important criteria for the lender before granting any loan.
  • The credit score shows the applicant’s creditworthiness. 
  • Credit history shows the applicant’s past financial prudence in the timely repayment of debt.
  • A higher credit score increases the applicant’s chances of getting a personal loan approved at a low interest rate and vice versa. 

Additional Reading: Check your credit score for free

Fixed Obligation to Income Ratio (FOIR)

  • The amount of applicant’s income utilized each month to repay their EMI's and credit card dues are key for evaluating the applicant’s personal loan application process.
  • FOIR refers to the ratio of existing loan EMIs and credit card dues over applicant’s

 monthly income. 

  • A FOIR > 50%, is considered as a risk factor by lenders which could impact an applicant’s loan eligibility and subsequent rate of interest for a personal loan.

Credit Utilization Ratio

  • Credit Utilization Ratios is the ratio of credit utilized against total credit available.
  • A lower credit utilization ratio implies lesser dependence on credit and higher repayment ability.
  • A higher credit utilization by the applicant is considered by lenders as over-dependent on credit making such applicants a high-risk category for repaying potential loans in a timely manner.
  • Top banks in India which offer the lowest personal loan interest rates expect loan applicants to have their Credit Utilization Ratio lower than 30% to 40%. 

Multiple Debts

  • Avoid having multiple debts with multiple lenders over a short time period, as too much debt impacts your personal loan eligibility. Even if sanctioned the interest rates are higher. 
  • Having too many loans implies a high debt appetite of applicants considering them as desperate for credit, increasing chances of debt default.
  • Multiple loans could negatively impact your credit score and chances of getting a personal loan at a low rate of interest.

Additional Reading: Various Types of Loan


Various factors impact the interest rates on personal loans. Ensure that you are aware of the requirements for availing low interest on a personal loan.  Also, compare the interest rates from different banks to find the right lender who offers you the best deal. 


1.  How is the processing fee for personal loans calculated?

The processing fee charged on personal loans varies from lender to lender. As a general rule, the processing fee is calculated either as a percentage of the overall loan amount applied by the applicant or as a fixed fee prescribed by the lender.

2. Is it always good to opt for a personal loan at a low rate of interest?

Interest on your personal loan relates to the cost of your loan amount. As such, it is an important component of your borrowing cost, implying higher interest cost increases the overall cost of loan. So, it is better to go for a personal loan that offers a low rate of interest. One should, however, be aware of the other charges levied by the lender on the personal loan applications.

3. Can I get a personal loan at a low interest rate even with a low credit score?

Yes. It is possible to avail of a personal loan at a low interest rate even with a low credit score. For this, you have to ensure that you get a co-applicant with a good credit score or a guarantor with good credit history who will back you up. If you have a good existing relationship with the lender, then this could also help you to get a personal loan at low interest rate but this criterion is exclusively at the discretion of the lender.

4. Will offering collateral grant me a loan interest rate for a personal loan?

If you offer collateral while availing of a personal loan, then you could get the loan at a low rate of interest. Based on your risk level and the value of collateral offered, banks will determine the amount of loan and the rate of interest. Offering collateral assures the bank that they have security against any potential non-repayment of debt. However, non-repayment could imply the lender might take over your collateral.

5. Will I get a lower rate personal loan if I choose my existing lender?

Yes, if you have maintained a good relationship with your existing lender, then your chances of availing personal loan at a low rate of interest improve significantly.