The interest is the returns gained by the banker on the principal amount being given on credit to the borrower. The loans can be availed from any of the lenders of the applicant’s choice according to the eligibility & suitability of the borrower. The borrower is charged higher interest rates on personal loans than the housing loan or else car loans. Also, personal loans are not exempted under any section of the income tax act. Banks also do charge processing fees in the range of 0.50%-2.50% depending on the lender to lender. The bank also imposes a penalty on the borrower in case of any delay or default of the installments by the borrower. A personal loan is a multi-purpose loan that can be used for multiple purposes. The bank does not ask for any proof on the expenditure of the loan being opted. As soon as the application is given instant amount is being credited to the bank account of the borrower. Personal loans can also be availed for the multi-purpose at a time. For example, if the borrower, once the loan is availed of a certain amount, can use the same amount to purchase electronic goods and utilize the same amount for the travel purpose.
Loans are disbursed by the bank within 48 hours in offline mode and within few minutes for the online mode. The personal loan approval is instant because the amount is smaller than the housing loan or corporate loan. The maximum amount up to which loans can be availed is Rs.25 lakh. The borrower should have all the necessary documents for the approval of loans. The documentation process is minimal in case of the personal loans to be availed. For the medical emergency, there is a special provision being available for the faster approval of loans. The borrower has to submit the medical details to the lender for the approval of loans. Some commercial establishments have tie-ups with the finance companies to approve the loans, which sometimes may be offered at lower interest rates to the borrower. In such cases, the borrower should take the benefit of that and avail loans at lower interest rates and save money on the interest repayment. The age criterion for availing of the personal loans is in the age group of 21-60 years till the date of maturity of the loan amount.
Following are the interest rates charged by the banks :
Bank name – UCO bank
Interest rates – 8.45% onwards
Maximum loan liability – Up to 10 lakhs
Bank name – Bank of India
Interest rates – 9.35% onwards
Maximum loan liability – Up to 10 lakh
Bank name – SBI
Interest rates – 9.60% onwards
Maximum loan liability – Up to 20 lakh
Bank name – Kotak Mahindra bank
Interest rates – 10.25% onwards
Maximum loan liability – Up to 30 lakh
Bank name – Axis Bank
Interest rates – 11% onwards
Maximum loan liability – Up to 15 lakhs
Bank name – HDFC Bank
Interest rates – 12.50% onwards
Maximum loan liability – Up to 25 lakhs
Bank name – Indiabulls
Interest rates – 13.99% onwards
Maximum loan liability – Up to 15 lakhs
Bank name – RBL Bank
Interest rates – 14% onwards
Maximum loan liability – Up to 1.20 lakh
Bank name – Home Credit
Interest rates – 24%
Maximum loan liability – Up to 2.4 lakh
Following are the factors affecting the interest rates on Personal Loans
Credit history and credit score
The credit score of an individual should be a minimum of 700 points which is considered a good one to avail personal loans at the lowest interest rates. The applicant who has a lower than 700 points score can be charged higher interest rates as compared to the borrowers with a higher credit score—also, the bank checks with the default history of the borrower. If the borrower has defaulted any of the loans previously either due to non-availability of funds or else a willful defaulter, the loan application may either be rejected or else may be charged higher interest rates.
Income of the borrower
If the income of the applicant is very low or else if the applicant is not having a consistent income due to continuous changing of jobs, the borrower may be charged with higher interest rates.
The UCO bank is the lender charging the lowest interest rates while the home credit finance company charges the highest interest rates to the borrower. The bank terms & conditions should be thoroughly be checked by the borrower before the approval of the loans. Some banks have rigid policies in case of documentation & credit score, while some banks have liberal policies regarding the loans.