What is the formula for calculating a personal loan EMI?

The formula which is used to calculate your personal loan Equated Monthly Installment is P x R x (1+R)^N / [(1+R)^N-1], where ‘P’ refers to the principal loan amount, ‘R’ indicates the monthly interest rate, and ‘N’ refers to the loan tenure in months.

How does reducing balance interest work?

With a reducing balance method, the lender only calculates interest on the outstanding loan principal at the end of each month. As you pay your regular Equated Monthly Installment, a portion goes toward the interest and the rest steadily chips away at the principal balance. The following month, your new interest charge is computed on that slightly smaller principal amount. Because the base amount continually shrinks over your tenure, your overall interest outgo is significantly lower than it would be under a static flat rate system.

How does MCLR affect personal loan EMI?

The Marginal Cost of Funds Based Lending Rate acts as an internal benchmark that banks use to price their floating rate loans. If you have opted for a personal loan linked to the MCLR, any periodic adjustments by the bank to this benchmark will directly influence your loan. An upward revision in the MCLR typically increases your EMI, and if the bank lowers its MCLR, your borrowing cost decreases.

What is the repo rate, and how does it affect personal loans?

Repo rate refers to the interest rate at which the Reserve Bank of India lends funds to banks. Any hike in this interest rate makes borrowing expensive for the banks; therefore, it increases the interest rate charged to the borrower. In case there is any fall in the repo rate, your current personal loan interest rate will also decline.

Does an RBI repo rate cut reduce personal loan interest rates?

Yes, a repo rate cut by the Reserve Bank of India generally leads to a reduction in personal loan interest rates, though the impact depends heavily on your loan type. If you have a floating rate loan linked to an external benchmark, your interest rate should decrease as per the RBI's rate cut. For new borrowers, a lowered repo rate means banks can offer cheaper starting interest rates since their own borrowing costs are reduced.

Which is better: a fixed or floating personal loan interest rate?

Choosing between a fixed or floating rate ultimately comes down to your financial goals and current market conditions. A fixed rate remains completely unchanged throughout your tenure, making it perfect for those who want predictable EMIs and easy long-term budget planning. A floating rate fluctuates based on benchmark changes, which is highly beneficial if you anticipate interest rates will drop in the near future.

What CIBIL score is needed for the lowest personal loan interest rate?

To unlock the most favorable and lowest interest rates available on the market, lenders typically look for a solid CIBIL score of 760 or higher. A score in this excellent range clearly demonstrates that you have a disciplined credit history and pose a very low risk of defaulting on payments.

Does your income affect your personal loan interest rate?

Your monthly income absolutely plays a substantial role in the interest rate a bank or NBFC decides to offer you. Lenders view applicants with higher incomes as carrying much lower credit risk, which frequently translates into better interest rates. A sturdy, high income reassures the lender that you have plenty of cash to comfortably manage your regular EMIs.

Why do two people with the same salary get different personal loan interest rates?

Even if two applicants earn the same monthly salary, lenders evaluate several other crucial risk factors that can drastically alter their final offered rates. One individual might boast a CIBIL score of 800, while the other struggles with a moderate score of 650, naturally leading to completely different pricing tiers. Other elements like existing debt obligations, employer stability, and prior banking relationships also influence the final offer.

Is the personal loan interest rate shown on Paisabazaar the final rate I will get?

The interest rates displayed initially on the platform usually represent the starting or "onwards" rates offered by the various banking partners. Your actual, final interest rate will be determined only after the lender thoroughly evaluates your complete application, credit profile, and supporting documents.

How soon after RBI's January 2026 rule can I prepay my loan without charges?

The specific cooling period after which you can prepay your existing loan generally ranges between 6 months and one year, depending on the lender’s policy. This cooling period can vary from one lender to another.

What should I check in the Key Facts Statement before accepting a personal loan offer?

The Key Facts Statement is a mandatory document that transparently summarizes all the financial aspects of your loan offer. You should keep an eye on important things like Annual Percentage Rate (APR) to understand the overall cost of borrowing, which includes the base interest rate along with other fees and processing charges. You should also double-check your EMI amount and the total interest payout over the tenure, along with any other charges related to prepayment or foreclosure.

Does Paisabazaar charge me anything to compare personal loan interest rates?

Using the Paisabazaar platform to check, compare, and apply for loan offers is completely free of charge for all consumers. The platform operates as an impartial financial marketplace and does not levy any hidden fees, subscription costs, or broker charges on you directly.

Will comparing personal loan rates on Paisabazaar affect my credit score?

Simply checking your eligibility and comparing various interest rates on the platform will not negatively impact your credit profile. When you request a comparison, the system runs a "soft inquiry" to fetch your credit details, which is harmless to your score. A hard inquiry only takes place when you actually proceed to officially apply for a specific loan directly with a chosen bank. Therefore, you can safely explore all your financial options and choose the best offer without any fear of dragging down your CIBIL score.

Is GST applicable on personal loan interest?

GST is not applicable on the interest component of personal loans. However, a GST of 18% is levied on the various personal loan fees and charges levied by the lenders.

Can a government employee qualify for special interest rates on personal loans?

Many leading banks in India offer special personal loan interest rates to government employees due to the higher job stability typically associated with those in government service as compared to private sector employees. Such employees should first approach the banks with which they maintain their salary accounts or other deposits, as many personal loan lenders offer lower interest rates to their existing customers.

Can I avail a personal loan at a lower interest rate despite having a low CIBIL score?

Personal loan applicants having a credit score of 760 and above reflect good credit behavior and financial discipline. Therefore, such applicants have a higher probability of getting their personal loan applications approved. Conversely, applicants with credit scores below 760 have lower chances of getting a personal loan. However, some NBFCs and fintech lenders offer loans to individuals with low credit scores. The personal loan interest rates offered by such lenders are usually higher than those offered by large banks and NBFCs.

Personal Loan Interest Rate 2026 - Compare Rates from 30+ Banks

Compare the latest personal loan interest rates offered by 30+ leading banks and NBFCs on Paisabazaar. Personal loan interest rates start from 9.99% p.a., with loan amounts of up to Rs. 50 lakh and repayment tenures of up to 84 months. Compare interest rates, processing fees, and other key features and apply for the most suitable personal loan based on your eligibility.

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Compare Personal Loan Interest Rates 2026

The table below shows the latest personal loan interest rates and processing fees offered by leading banks and NBFCs. Compare these key features to choose the lender that best suits your borrowing requirements:

Bank/NBFC	Interest Rates (% p.a.)	Processing Fees
Aditya Birla Finance	10.99 onwards	Up to 4%
Axis Bank	9.99 onwards*	Up to 2%
Bank of Baroda	10.15-18.00	Up to 2% (Max. Rs. 10,000)
Bajaj Finance Limited	10.00-30.00	Up to 3.93%
Bank of India	10.85-16.15	Up to 1% (Min. Rs. 250; Max. Rs. 15,000)
Bank of Maharashtra	8.75-13.55	Up to 1% (Max. Rs. 10,000)
Canara Bank	9.70-15.15	Up to 0.5% (Max. Rs. 5000)
Central Bank of India	9.85-11.65	Up to 1%
Cholamandalam IFC	10.00-28.00	4% - 6%
Dhani Loans & Services Ltd.	13.99 onwards	3% onwards
Federal Bank	12.00 - 22.50*	Up to 2%
HDB Financial Services	10.00 - 35.00	Up to 5.90%
HDFC Bank	9.99 onwards	Up to Rs 6,500
Hero Fincorp	Up to 30*	2.3% - 3%
HSBC Bank	9.75 onwards	Up to 2%
ICICI Bank	9.99 onwards	Up to 2%
IDFC FIRST Bank	9.99 onwards	Up to 3.5%
IIFL Finance	12.00 - 28.00	2% - 9%
Indian Overseas Bank	10.25 onwards	Up to 0.75%
IndusInd Bank	10.35 onwards*	Up to 3.5%
Kotak Mahindra Bank	9.99 onwards*	Up to 5%
L&T Finance	11.00 onwards	Up to 3%
Mahindra Finance	8.00 - 25.00	2% of loan amount or Rs. 5,000, whichever is lower
Mannapuram Finance	18.00 - 24.00	1% of loan amount
Moneyview	14.00 onwards	2% onwards
Muthoot Finance	13.50 onwards	Varies for each application
Piramal Finance	12.14 onwards	Up to 5%
Poonawalla Fincorp	9.99 onwards	Up to 3%
Punjab & Sind Bank	9.60-13.85	0.50% - 1%
Punjab National Bank	10.25-16.80	Up to 1%
Shriram Finance	11.00 onwards	Up to 5%
Tata Capital	10.99 onwards	Up to 3.5%
UCO Bank	9.95 - 13.20	Up to 1% (Min. Rs. 750)
Union Bank of India	8.75 - 12.55	Up to 1% (Max. Rs. 7,500)

*Paisabazaar special rates

Note: Rates as of 17th July 2026

Quick Facts - Personal Loan Interest Rate at a Glance

Evaluating loan offers becomes much easier once you understand the basic mechanics of a personal loan. The breakdown below shows the important information - including interest brackets, total loan amounts, repayment windows, and more- to help you make an informed decision.

Particulars	Details
Interest Rate	Starts from 9.99% p.a.
Loan Amount	Up to Rs. 50 lakh
Repayment Tenure	Up to 84 months
Interest Rate Type	Usually Fixed (varies by lender)
Processing Fee	Up to 4% (varies across lenders)
Prepayment Charges	As per the lender's policy
Eligibility	Depends on income, CIBIL score, employment type, repayment capacity, etc.

What is a Personal Loan Interest Rate?

When you borrow funds through a personal loan, lenders charge a specific percentage on top of the principal amount. Calculated annually (per annum, p.a.), this personal loan interest rate directly dictates your overall borrowing cost. Simply put, a lower interest rate translates to lower Equated Monthly Installments (EMIs) and less interest paid over time, whereas a higher rate results in higher EMIs and overall borrowing cost.

Lenders do not offer a uniform rate to every applicant. The rate offered to you depends on several factors, including your CIBIL score, monthly income, employment category, existing debt-to-income ratio, and the lender’s internal risk assessment policies. Because of this variation, comparing multiple loan offers before applying becomes essential to secure the right personal loan for your financial capability.

Which Bank Has the Lowest Interest Rate on Personal Loan?

The lowest personal loan interest rate is typically offered to consumers who have an excellent credit profile and often come with stringent criteria. Some public sector banks may offer relatively lower rates under special schemes to select applicants fulfilling their strict eligibility criteria.

At Paisabazaar, you can compare loan offers from multiple lenders and avail a personal loan at an interest rate starting from 9.99% p.a., from Kotak Mahindra Bank, IDFC FIRST Bank, HDFC Bank, Axis Bank, and ICICI Bank.

You should also consider that the interest rates vary from one borrower to another. This is because it is decided based on multiple factors like CIBIL score, monthly salary, employment type, and repayment capacity, along with the bank’s internal policies. It is advisable to compare interest rates of personal loans offered by various banks and NBFCs and apply for the best loan offer as per your eligibility and requirements.

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Paisabazaar’s Personal Loan interest rate calculator helps you to find out your monthly EMI, interest to be paid, and total amount of repayment for your loan. The calculator does a quick EMI calculation based on the loan amount, interest rate, and loan tenure.

How Interest Rates Affect Your Loan Tenure and EMI

Personal loan tenures usually range from 1 to 5 years, with some banks and NBFCs offering longer tenures of 6, 7 or 8 years. The choice of loan tenure directly affects the borrower’s EMIs and total interest cost.

Opting for a longer tenure lowers loan EMIs, making repayment easier for borrowers having limited repayment capacity. However, this convenience comes at the cost of incurring higher interest costs.Borrowers who choose longer tenures can reduce their total interest cost by making prepayments whenever they have surplus funds. Personal loan applicants should opt for shorter tenures only when they have adequate repayment capacity for the EMIs.

Example - Rs. 5 Lakh Loan EMI Across Tenures

The table below compares a Rs. 5 lakh personal loan with different tenures but at the same interest rate:

Tenure	Interest Rate (p.a.)	EMI	Total Interest	Total Payable
1 year	11.50%	Rs 44,308	Rs 31,690	Rs 5,31,690
2 years	11.50%	Rs 23,420	Rs 62,084	Rs 5,62,084
3 years	11.50%	Rs 16,488	Rs 93,568	Rs 5,93,568
4 years	11.50%	Rs 13,045	Rs 1,26,136	Rs 6,26,136
5 years	11.50%	Rs 10,996	Rs 1,59,778	Rs 6,59,778

If you have adequate cash flow, you can opt for shorter tenures to save on overall interest cost. But if you are not able to manage higher EMIs or have limited repayment capacity, you can opt for longer tenures and consider prepaying your loan when you have adequate funds, keeping aside emergency funds.

Personal Loan Interest Rate of Top Lenders

Personal loan interest rates vary across banks and NBFCs based on their lending policies and your eligibility. Below are the starting interest rates offered by some of the leading lenders. Click on the respective pages to check the latest interest rates, eligibility criteria, fees & charges, and other loan details.

SBI Personal Loan Interest Rate

State Bank of India offers personal loans starting at 10.00% p.a., along with a processing charge of up to 1.50% of the total loan amount. The final rate offered to you is determined by your credit history and eligibility metrics. For a detailed breakdown of applicable charges, eligibility conditions, and tenure options, visit our dedicated SBI personal loan interest rate page.

HDFC Bank Personal Loan Interest Rate

With starting interest rates at 9.99% p.a., HDFC Bank processes personal loans with a processing fee capped at Rs. 6,500. The final rate you secure depends on your repayment history and credit score. Explore the complete details regarding features, fees, and eligibility on our detailed HDFC Bank personal loan interest rate page.

ICICI Bank Personal Loan Interest Rate

Interest rates for ICICI Bank personal loans start from 9.99% per annum, alongside a processing fee that is charged at up to 2% of the entire amount of the loan. However, the exact interest rate varies depending on several factors, including your income level, credit rating, employment status, among others. Check out our comprehensive ICICI Bank personal loan interest rate to evaluate the latest rates and processing guidelines.

Axis Bank Personal Loan Interest Rate

Axis Bank offers personal loans starting at 9.99% p.a., alongside a processing fee of up to 2% of the loan value. The bank evaluates your credit profile and financial background to finalize the applicable interest rate. You can check our dedicated Axis Bank personal loan interest rate page to review comprehensive interest details and flexible repayment options.

Kotak Mahindra Bank Personal Loan Interest Rate

Kotak Mahindra Bank stands out with a starting rate of 9.99% p.a., though its processing fee can go up to 5% of the loan quantum. Your credit background and financial eligibility play a major role in the final rate offer. You can review all associated charges and product highlights on our dedicated Kotak Mahindra Bank personal loan interest rate page.

IDFC FIRST Bank Personal Loan Interest Rate

Starting at 9.99% p.a., IDFC FIRST Bank provides personal loans with processing fees of up to 2% of the principal. The final interest rate depends on your income, credit score, and repayment history. Visit our IDFC FIRST Bank personal loan interest rate page to check the latest eligibility parameters and fee structures.

Fixed vs. Floating Personal Loan Interest Rate

The types of interest rates that can be levied include the fixed interest rate and the floating interest rate. Whereas the majority of lenders in India’s retail lending sector provide personal loans at fixed interest rates, some lenders levy loans at floating interest rates. It is always beneficial to know about both types of interest rates and choose the best option to repay the loan.

Fixed Interest Rate

A fixed interest rate is simply constant throughout the entire term of the loan.
Your EMIs will thus remain constant and help you to more easily organize your finances every month.
For this reason, a fixed-rate personal loan is suitable for those who want fixed installments and want to be protected from changes in interest rates in the future.

Floating Interest Rate

A floating interest rate is usually calculated with reference to a benchmark rate of the lender, such as the current RBI Repo Rate or EBLR.
The interest rate on your loan may change while the loan is outstanding.
If the benchmark rate goes up, your tenure or the EMI increases accordingly.
On the other hand, if the benchmark rate comes down, the tenure gets reduced, or your EMI decreases depending upon your choice and the lender’s approval.

Fixed vs. Floating Personal Loan Interest Rate - Comparison

The table below compares fixed and floating personal loan interest rates based on some of the key parameters to help you understand their differences.

Parameter	Fixed Interest Rate	Floating Interest Rate
Interest Rate	Remains unchanged throughout the loan tenure	Changes based on the repo rate or EBLR
EMI	Usually remains the same	May increase or decrease over the loan tenure
Impact of RBI Repo Rate	No direct impact	May increase or reduce the interest rate
Budget Planning	Easier due to fixed EMIs	Less predictable as EMIs or tenure may change
Suitable For	Borrowers who prefer stable repayments	Borrowers who expect interest rates to fall

How Personal Loan Interest Rate is Calculated

Most banks and NBFCs use the reducing-balance method, meaning the interest is levied only on the outstanding loan amount after every EMI payment. On the other hand, a few lenders might apply the flat interest rate method, where the interest is calculated on the entire initial loan amount for the whole tenure. Knowing how these calculations work helps you to compare different loan offers accurately and estimate your overall borrowing costs.

Flat Rate vs. Reducing Balance Method

The mechanics behind interest calculation typically boil down to either the flat-rate method or the reducing balance approach.

Flat Rate Method: Calculates your interest based on the original loan amount for the entire duration, regardless of how much principal you clear.
Reducing Balance Method: Recalculates the interest monthly based only on the outstanding principal balance.

Note: Loans processed through the reducing balance method generally come with a significantly lower borrowing cost, which makes it the preferred choice for most borrowers and lenders.

The table below shows the major differences between these two methods:

Parameter	Flat Interest Rate	Reducing Balance Method
Interest Calculation	Calculated on the original loan amount throughout the tenure	Calculated only on the outstanding loan balance
Interest Payable	Usually higher	Usually lower
EMI	Remains fixed	Usually remains fixed, but the interest component reduces over time
Principal Outstanding	Not considered while calculating interest	Reduces after every EMI, lowering the interest charged
Commonly Used By	Limited lenders	Most banks and NBFCs

Personal Loan Interest Rate by Bank Type: PSU, Private Bank, NBFC/Digital Lenders

The timeline, interest rate, loan amount, and eligibility criteria on personal loan vary among public sector banks, private banks, and NBFCs. Given below is a detailed comparison table of these three types of lenders:

Parameter	Public Sector Banks (PSUs)	Private Banks	NBFCs/Digital Lenders
Interest Rate	Relatively lower	Competitive	Relatively higher
Eligibility	Stricter	Moderate	More flexible
Approval Time	May take longer	Faster	Usually quick
Documentation	Standard documentation (often required offline)	Standard documentation	Minimal to moderate
Best Suited For	Applicants with strong credit profiles	Salaried professionals and existing customers	Self-employed or applicants with limited eligibility/average credit scores

Factors That Decide Your Personal Loan Interest Rate

The interest rates charged by banks and NBFCs on your personal loan are not the same for all applicants. Several factors influence the rate of interest, and these factors allow the lenders to judge your creditworthiness. Consumers with a strong financial profile get a chance to avail low-interest-rate personal loans. Following are some of the key factors affecting your personal loan interest rate:

Credit Score

Your CIBIL rating is considered by lenders as an exact measure of your financial discipline.
If you have a positive repayment history, lenders will consider the risk of default to be minimal, and thus they will be willing to give you better rates.
Having a credit score of 760 and above helps you get the loan at a better interest rate and favourable terms.

Income

Your net income tells a lender whether your monthly cash flow can absorb a new debt obligation.
Substantial and consistent monthly earnings assure lenders that you can easily repay the loan amount.
Because of this security, high-income earners face less risk than applicants with irregular or lower income brackets.

Occupation Profile

Your employment also plays a major role in how lenders calculate income stability.
Salaried individuals working with government bodies, PSUs, or multinational corporations get highly competitive rates due to low job volatility.
While self-employed applicants face a different assessment, they can still lock in excellent terms by presenting healthy, audited business revenues and sustained industry growth.

Existing Relationship with the Lender

Prior relationship with a specific bank or NBFC can also help you get a personal loan at a better interest rate.
Maintaining a salary account, active savings balance, fixed deposits, or an existing credit card provides a lender with clear insight into your financial habits.
You can also get pre-approved loan offers if you have a strong relationship with the bank.

Employment History

Frequent job-hopping can raise red flags regarding your future financial predictability.
Lenders highly value professional longevity, viewing an uninterrupted, multi-year employment history as a sign of financial stability.
A steady career makes you a safe applicant, which can help you get a personal loan at favourable terms.

Loan Amount & Repayment Tenure

The exact amount of capital you request, combined with your repayment timeline, directly alters the lender's underlying risk matrix.
Depending on internal banking policies, large loan amounts or highly extended tenures can shift the applicable interest bracket.
You should choose a loan amount and tenure that match your repayment capacity so that you can easily manage your EMIs.

What Is a Good Personal Loan Interest Rate by CIBIL Score?

Applicants with a strong credit score usually have higher chances of getting a personal loan at a better interest rate. If your CIBIL score is 760 or above and is supported by a steady income, you can avail personal loans at a lower interest rate.

However, the final interest rate is decided by the lender by assessing your credit profile, repayment history, employment type, and other factors. In addition to this, you should consider APR, as apart from the interest rate, other charges like processing fees, foreclosure charges, and more can increase your overall cost of borrowing.

The good interest rate would be the one that has the overall lowest APR and suits your financial needs and repayment capability.

5 Tips to Get a Personal Loan with Low Interest Rate

Getting a personal loan at a lower interest rate requires a strong credit profile and repayment history. Here is how you can improve your chances of availing a personal loan at a low interest rate:

Keep Your CIBIL Score Above 760: Your credit score is the first filter a lender reviews. Timely debt repayment and low credit usage reflect responsible financial behavior, which can automatically qualify you for a lower interest rate.
Check Pre-approved Offers First: The lender with your active salary accounts or fixed deposits already understands your cash flow and is far more likely to give preferential interest rates to keep your business.
Stable Income and Employment: Frequently changing your job can raise red flags for lenders. They prefer applicants with steady corporate experience, as a reliable professional background guarantees a secure income stream to back the loan.
Compare Personal Loan Offers via Paisabazaar: Do not accept the first offer you receive. Comparing multiple banks and NBFCs on Paisabazaar gives you a clear view of the market landscape, ensuring you don't overpay on interest rates or processing fees.
Space Out Your Credit Inquiries: Applying for numerous credit products within a short span of time triggers consecutive hard credit checks. This has the potential to damage your credit health and reduce your ability to negotiate favorable terms.

How to Reduce Your Personal Loan Interest Rate

Whether you are applying for a new personal loan or currently managing an active debt, minimizing borrowing costs is possible only with the right strategy. Given below are some of the common ways to reduce the interest rate on your personal loan:

Maintain a higher CIBIL score: Clearing credit card balances and EMIs by their due dates creates a positive credit history, which makes you eligible to get a personal loan at a better interest rate.
Compare offers from multiple lenders: Interest rates are never uniform across banks and NBFCs; comparing rates of multiple banks and NBFCs will help you explore options with comparatively lower interest rates.
Negotiate with your lender: A positive repayment track record or a long-term banking partnership gives you the power to negotiate the interest rate directly with your lender.
Opt for a Personal Loan Balance Transfer: If any other lender offers significantly cheaper rates, moving your current loan can instantly lower your monthly EMI and overall interest burden.
Choose a shorter repayment tenure: Opting for a shorter tenure reduces the amount of interest that accumulates over time, but in such cases, your monthly EMI might be higher.

Fees and Charges on Personal Loans

While the fees and charges applicable to personal loans vary from one lender to another. The table below shows the common fees & charges that are levied when you apply for a personal loan:

Particulars	Charges
Processing Fees	0.5% to 4% of the loan amount
Stamp Duty Charges	As per actuals
EMI/Cheque Bounce	Around Rs. 400 per bounce
Legal Fees	As per actuals
Prepayment and Foreclosure Charges	1%-5% of the outstanding loan amount
Late Payment Penalty	Usually @ 2% per month; 24% p.a.

Processing Fees

Processing fees cover the underlying costs of evaluating your loan application.
Typically ranging from 0.5% to 4% of the total loan value, this percentage varies based on the lender’s policy and your individual credit risk.
Lenders usually deduct this sum directly from the approved loan amount before disbursal, though some lenders may collect it separately during the verification stage.

Prepayment and Foreclosure Charges

Clearing your debt ahead of schedule is often accompanied with prepayment or foreclosure charges.
The prepayment or foreclosure charges usually range between 1% and 5% of your remaining principal balance, as per the lender's guidelines.
You can, however, prepay your loan only after the completion of a cooling period of 6 months to 1 year.
Before closing your loan early, always make sure that an early closure genuinely makes sense, and such charges do not outweigh your interest savings

New RBI Rule (2026): No Prepayment Charges on Floating-Rate Loans

According to the RBI's revised guidelines, lenders cannot levy foreclosure or prepayment charges on loans offered at floating interest rates.
This regulation, however, does not apply to fixed-rate personal loans, which means that lenders can levy foreclosure or prepayment charges in case of early closure of personal loans with fixed interest rates.
You can only prepay your loan amount after the completion of a specific cooling period, which can range from 6 months to 1 year, as per the lender’s policies.
Always check your loan terms before planning an early repayment.

Late Payment Penalties

If you miss your EMI due date, the lender may charge a late payment penalty or overdue interest on the unpaid amount until it is cleared.
It is generally charged as 2% per month on the overdue EMI, although the exact rate varies across lenders.
Besides late payment charges, missing your EMIs also negatively impacts your CIBIL score, which makes it difficult for you to avail personal loans in the future at a better interest rate.

Also Read: How RBI's Lending Guidelines Protect Personal Loan Borrowers

Personal Loan Annual Percentage Rate

Annual Percentage Rate (APR) represents the overall annual cost of a personal loan offered by any lender. Borrowers usually calculate the overall borrowing cost only considering the interest rate. But APR shows the final cost, including multiple charges, such as processing fees, documentation charges, and verification fees, along with the interest rate.

APR refers to the total annual cost of a personal loan. While an ordinary interest rate only indicates the cost associated with the borrowed money, the APR takes into account the other additional costs like processing charges, documentation charges, and verification charges.

The APR is a far more reliable factor when comparing loan offers from multiple banks or NBFCs. For example, if two lenders have the same interest rate, but the processing fee for both lenders varies, the lender with a higher processing fee will have a higher APR, which can increase your overall cost of borrowing.

Example:

Suppose you borrow Rs. 4 lakh at a 12% p.a. interest rate for a 3-year tenure, at a 1.5% processing fee (Rs. 6,000). While the nominal interest rate sits at 12%, the addition of the processing fee will result in the final APR of approximately 13.05%.

How MCLR and Repo Rate Impact Personal Loan Interest Rates

Personal loan interest rates depend on two factors - Marginal Cost of Funds-based Lending Rate (MCLR) and RBI Repo Rate. When there is any shift in either of the factors, your interest rate also changes. Given below is what MCLR & Repo Rate are and how they affect your personal loan interest rate:

What is MCLR?

Marginal Cost of Funds-based Lending Rate (MCLR) serves as a mandatory floor rate below which commercial banks cannot offer personal loans or any credit product, except for select cases. Each lender calculates its individual MCLR by factoring in its operating costs, cost of funds, and cash reserve mandates. Consequently, if your personal loan interest rate is linked to MCLR, any change or adjustment the bank makes to its MCLR may affect your current interest rate.

Latest MCLR of Top Lenders

Banks periodically review and revise their MCLR based on changes in their cost of funds and other factors. The table below shows the latest overnight MCLR of some leading banks in India.

Bank	Latest MCLR	Effective Date
SBI	7.85	15-12-2025
HDFC Bank	8.25%	07-01-2026
ICICI Bank	7.80%	22-12-2025
Federal Bank	8.20%	16-12-2025
Axis Bank	8.50%	18-12-2025
Kotak Mahindra Bank	7.50%	16-12-2025
IDFC FIRST Bank	9.50%	08-01-2026
YES BANK	8.90%	01-01-2026
IndusInd Bank	9.85%	22-12-2025
RBL Bank	8.20%	22-12-2025

Note: MCLR is revised periodically by banks. The rates shown above are indicative and subject to change.

How RBI Repo Rate Changes Affect Your EMI

Repo Rate is the basic interest rate that the Reserve Bank of India charges commercial banks for lending money. When the RBI increases this rate, your lender also increases the current interest rate on your floating-rate personal loan. If the RBI lowers this rate, your current interest rate on a floating-rate personal loan will also be reduced, which can lower your overall cost of borrowing or may shorten your repayment tenure.

Illustrative Example: Comparing Lenders for the Same Loan

Scenario:

Mr. Vinay Prasad was planning to take a Rs. 5 lakh loan to fund his son’s higher studies for 5 years. He had an existing salary account with IndusInd Bank and a savings account with Federal Bank. But before accepting an offer, he came to Paisabazaar and compared offers from various lenders.

He found out that he had an existing pre-approved offer from HDFC Bank at a comparatively lower interest rate of 9.99% p.a.

Bank/NBFC	Interest Rate (p.a.)*	Monthly EMI	Total Interest Payable	Total Repayment
HDFC Bank	9.99%	Rs. 10,624	Rs. 1,37,440	Rs. 6,37,440
IndusInd Bank	10.50%	Rs. 10,798	Rs. 1,46,880	Rs. 6,46,880
Federal Bank	12.00%	Rs. 11,085	Rs. 1,65,120	Rs. 6,65,120
Bajaj Finserv	13.50%	Rs. 11,509	Rs. 1,90,540	Rs. 6,90,540

Key Insights

From the above table, it is clear that even a slight difference in the interest rate can significantly increase your overall cost of borrowing. Therefore, you should always compare personal loan offers from multiple banks and NBFCs before applying to choose the right personal loan offer as per your financial capability to lower your monthly EMIs and final cost of borrowing.

Personal Loan Interest Rate for Government Employees & Women Borrowers

Lenders may offer better personal loan interest rates to specific borrower segments, particularly government sector employees and female applicants. Because government roles offer job security and predictable monthly income, it makes these applicants highly stable and low-risk borrowers. Similarly, many banks and NBFCs introduce dedicated concessional rate schemes tailored for women from time to time.

Even so, these benefits are never guaranteed. Your final approval depends on your credit history, monthly salary, and the lender’s specific eligibility criteria. Comparing offers across multiple banks or NBFCs helps you pick a lender that offers a suitable interest rate according to your financial needs and repayment capability.

Personal Loan Balance Transfer to Reduce Interest Rate

Switching your personal loan to another bank or NBFC through a personal loan balance transfer can be a highly effective way to avoid a high interest rate.
Apart from the interest rate, a balance transfer can reduce your monthly EMIs and give you a more suitable timeline to repay the loan amount as per your financial capability.
Personal loan balance transfer is a smart move if and only if your long-term interest savings outweigh the combined weight of your current lender's exit penalties and the new lender’s processing fees, stamp duty, or any other onboarding charges.
Comparing interest rates and other charges across multiple lenders is the most reliable way to ensure the loan transfer actually cuts your borrowing costs.

Why Compare Personal Loan Interest Rates Before Applying?

Applying for the first loan offer you receive is rarely a smart financial move. Even a small difference in your interest rate can significantly lower your overall borrowing costs. Given below are some of the key benefits of comparing interest rates of multiple lenders before applying for a personal loan:

Choose the most affordable loan: Compare the interest rates across various banks and NBFCs to identify the lenders that are currently offering the most competitive interest rates and affordable EMIs.
Understand the overall borrowing cost: A detailed comparison around Annual Percentage Rate (APR), foreclosure charges, processing fees, and other penalties before you sign the agreement can help you calculate the overall borrowing cost better.
Find suitable loan terms: Different lenders provide different tenures and loan amounts. This gives you the flexibility to choose a lender as per your financial capability so that your debt easily aligns with your monthly cash flow.
Save more over the loan tenure: Over a longer repayment period, even a slight reduction in the interest rate can help you reduce the overall cost of borrowing.

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FAQs

What is the interest rate for a personal loan?

The personal loan interest rate is basically the annual cost of the loan taken by a borrower that is charged by any bank or NBFC. The lenders evaluate each applicant’s credit profile and decide the interest rate according to the applicant’s eligibility.

Which bank has the lowest interest rate on a personal loan?

The lowest interest is usually charged by banks for those consumers who have a great credit score and come with strict requirements. On Paisabazaar, you can browse through various banks' loan offers and get a personal loan at an interest rate as low as 9.99% p.a. from Kotak Mahindra Bank, IDFC FIRST Bank, HDFC Bank, Axis Bank, and ICICI Bank. It must also be kept in mind that different consumers pay different interest rates on loans.

How do you calculate the personal loan interest rate?

Lenders typically determine your specific interest rate by evaluating their own cost of funds alongside the credit risk you present as an applicant. They assess your monthly income, occupation profile, existing banking relationships, and credit score to finalize the number.

What is a good interest rate for a personal loan?

What is the maximum interest rate for a personal loan?

The maximum interest rate for a personal loan varies from one lender to another, as every lender calculates the risk and decides the interest rate accordingly, depending on the lender and the perceived risk of the borrower. While the maximum interest rate can go up to 24% per annum, depending on the lender’s internal policies.

What is the difference between a flat interest rate and a reducing interest rate?

A flat interest rate is calculated on the entire original principal amount, whereas a reducing interest rate is calculated only on the outstanding principal balance that remains after each monthly installment is paid. In almost all cases, a reducing balance method is far more beneficial and cost-effective for borrowers than a flat rate system.

What is APR in a personal loan?

APR refers to the total annual cost of a personal loan. While the interest rate is calculated only considering the cost associated with the borrowed money, the APR takes into account the other additional costs like processing, documentation, and verification fees.

What is the difference between an interest rate and APR?

Your base interest rate is strictly the core percentage charged by the lender on the principal loan amount, exclusive of any extra administrative costs. The Annual Percentage Rate provides a much broader view by combining that core interest rate with upfront expenses like processing and legal fees.

Is the ICICI Bank personal loan interest rate lower than that of Axis Bank?

When looking at their starting figures, both ICICI Bank and Axis Bank offer competitive interest rates in the market. They both offer personal loan interest rates beginning from 9.99% per annum as of the latest updates.

Which app offers personal loans with the lowest interest rates?

The Paisabazaar app offers the lowest interest rate starting from 9.99%. You can use the app to compare personal loan offers from more than 30 banks and NBFCs and get the best personal loan offers for yourself.

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What our customers say

Get My Personal loan disbursed

I would like to give a huge shoutout to Munni Nayak from Paisabazaar for her incredible support in helping me get my personal loan disbursed within just a few days. She was extremely cooperative throughout the entire process and demonstrated great knowledge by explaining every step in detail with patience and clarity. I truly appreciate her dedication, professionalism, and the smooth experience she provided. Thank you so much, Munni, for all your help and support!

Preeti BhattMay 16, 2026

Smooth & hassle-free loan approval experience

I want to express my gratitude for your exceptional support & guidance throughout my loan application process to Aman (EW17239). Your professionalism & clear communication made the journey smooth and manageable. I appreciate how you helped during loan approval & fast-tracked the documentation. It is rare to find someone so committed to their clients. I truly value the effort you put into ensuring a successful outcome. Thanks again for your invaluable help.

Sanjay Kumar GuptaMar 30, 2026

Exceptional guidance throughout the process

I’d like to express my sincere appreciation for Mr. Aman Kumar (EW32023) for the excellent assistance provided. His professionalism & willingness to help made the experience smooth & pleasant. Aman Kumar demonstrated patience & clarity while addressing queries and ensured that everything was handled efficiently. Such dedication & customer-focused service truly deserve recognition. Please convey my thanks and appreciation to him for his outstanding support.

Jyotirmoy SinghaMar 23, 2026

Very helpful and easy to reach

I really wants to appreciate Mohankumar Dhandapani for closing my loan requirement in such a short time and nice manner. He is very much approachable helped me based on my requirements. He explained me all the options in very short time even one option failed immediately helped me to get other options worked. Excellent job done by Mohankumar Dhandapani all the best keep you same way approachable you will get more customers. Thanks to Paisabazar too.

Kirubagaran GanesanFeb 24, 2026

Reliable help when i needed it most

I am writing this email to express my sincere thanks for your excellent support and guidance on Paisabazaar. My experience was very smooth and satisfying because of your help. You explained everything clearly and made the whole process easy and comfortable for me. I truly appreciate your professionalism, patience, and quick response. I am very happy with the service and would definitely recommend to others because of the great support I received from you. Thank you once again

DharmeshFeb 22, 2026

Committed support that made everything easy

I’d like to appreciate the Paisabazar team for the excellent loan service. I especially want to recognize one of your agents, Mr. Prince Kumar, for his outstanding support. For more than a month, he continuously followed up with me and assisted me. His commitment & professionalism made the experience smooth & hassle-free. I appreciate his efforts and dedication. Kindly acknowledge his performance and consider rewarding such a sincere employee.

BhupendraFeb 18, 2026

My Trust in Paisabazaar has Increased

I would like to take a moment to share my sincere feedback regarding the support I received from your team. The executive who assisted me was extremely professional, polite, and knowledgeable. They patiently understood my concern, explained the process clearly, and guided me step by step toward the right solution. I truly appreciate the transparency, timely responses, and genuine effort shown to help me.

Lalit MaviFeb 12, 2026

Best Place for Taking Loans

I contacted customer care with a few queries, and I am very satisfied with the support I received. The representative was polite, patient, and explained everything clearly. My questions were resolved properly, and the overall experience was smooth and helpful. Thank you for the excellent customer service

Kokil BarnwalFeb 12, 2026

Easy loan approval with good guidance

Thank you for the support provided for getting personal loan approval. During this process I worked with Mr. Aman Bajpai (EW17239) who was co-ordinator for this entire process of Personal loan, I was incredibly impressed by his efficiency and problem-solving skills. He went out of their way to ensure all my questions were answered and that the disbursement timeline stayed on track. His coordination was really appreciable.

Riyaj AtarFeb 9, 2026

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Muhje higher education ke liye loan chahiye tha. Paisabazaar pe apply kiya. Got it at the right time. Quite helpful.

Puja DanuJan 22, 2026

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Written By

Anubhuti Agrawal

Reviewed By

Shamik Ghosh

Paisabazaar is a loan aggregator and is authorized to provide services on behalf of its partners.

The APR (Annual Percentage Rate) of a personal loan is its annualised cost of borrowing, which includes the interest rate as well as the processing fees, documentation fees and other fees charged during the loan origination. The APR is expressed in the form of a percentage and thus, allows personal loan applicants to detect personal loan schemes offered at lower interest rates but with higher processing fees and/or other charges.

The APR of personal loans usually ranges between 11.29% to 35%. For example, assume that you have availed a personal loan of Rs. 5 lakhs @ 10.50% p.a. with a repayment tenure of 5 years. The processing fee charged for this loan is 1.5% of the loan amount, which amounts to Rs 7,500. Therefore, the total borrowing cost of your personal loan will be Rs 1,52,317 and its APR will be 11.16%.

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