In India, personal loans have gained significant traction as a quick and efficient means of meeting financial needs. Whether it’s for a wedding, medical emergency, home renovation, or consolidating debt, a personal loan can provide immediate access to funds without the need to pledge any collateral. Non-Banking Financial Companies (NBFCs) have risen as key players in this sector, offering flexible options and competitive interest rates to meet diverse borrowing requirements.

In this article, we will discuss the prevailing interest rates offered by leading NBFCs in India and help you understand how these rates vary. 

What is a Personal Loan?

A personal loan is an unsecured loan offered by financial institutions to individuals. Since these loans do not require collateral, lenders assess the borrower’s creditworthiness based on their credit score, income, and repayment capacity. The flexibility of using the loan for any personal purpose—from travel to emergencies—makes it a preferred choice for many.

Personal loans typically have fixed interest rates and repayment tenures ranging from 12 to 60 months, allowing borrowers to repay in monthly instalments. To know exactly what the monthly repayment will be, a personal loan EMI calculator can come in handy. The calculator provides an estimate of your monthly EMIs based on the loan amount, interest rate, and tenure.

Factors Influencing Personal Loan Interest Rates

The interest rates on personal loans can vary based on several factors:

• Credit Score: The higher your credit score, the lower the interest rate you can expect. A credit score of 750 or above is usually considered excellent and can help you secure a lower interest rate.
• Income Level: A stable and higher income profile improves your chances of securing a lower interest rate. Lenders view borrowers with higher earning potential as low risk.
• Employment Type: Salaried employees working with reputed companies or government organizations are likely to get better interest rates than self-employed individuals.
• Loan Amount and Tenure: The amount you wish to borrow and the tenure of repayment can also affect the interest rate. Typically, shorter tenures attract lower rates but higher EMIs.

NBFCs offer competitive interest rates, typically ranging from 9% to 26%, depending on your credit profile, loan amount, and repayment tenure. Let’s take a closer look at the current interest rate ranges.

Current Personal Loan Interest Rates from Leading NBFCs

Here are the general interest rates you can expect when applying for a personal loan from NBFCs. These rates are indicative and can vary based on the lender and borrower’s profile.

1. Interest Rates Starting at 9.5%: Some NBFCs offer personal loans starting as low as 9.5% for individuals with excellent credit scores (750 and above). If you maintain a strong credit history and have a high, stable income, you are more likely to qualify for this rate. Using a personal loan EMI calculator at this interest rate can help you assess your monthly repayment amount.
2. Rates Between 10% and 12%: Many NBFCs offer interest rates in the 10%-12% range for borrowers with a decent credit score (700-749) and a steady income. If you’re a salaried employee or self-employed professional, you may fall into this category.
3. Interest Rates in the 13%-15% Range: For borrowers with credit scores between 650 and 699, interest rates usually hover around 13% to 15%. While this range is slightly higher, it is still manageable if you have consistent earnings. Be sure to check your EMI using a personal loan EMI calculator before committing.
4. 16%-18% Interest Rates: If your credit score is between 600 and 649, NBFCs might offer you interest rates between 16% and 18%. These rates are generally for individuals with slightly riskier credit profiles.
5. Interest Rates of 19%-22%: Borrowers with credit scores in the 550-599 range might be offered rates between 19% and 22%. These rates are higher, but personal loans are still accessible to individuals in this bracket if other factors such as income and employment are favourable.
6. Rates Above 23%: Borrowers with credit scores below 550 may receive interest rates exceeding 23%. In such cases, lenders consider the borrower high-risk, leading to higher costs. It’s crucial to calculate the EMI using a personal loan EMI calculator before committing, especially with higher rates, to ensure that the repayment fits within your budget.

Tips to Secure the Best Personal Loan Interest Rate

1. Improve Your Credit Score: A good credit score is crucial for securing low interest rates. Regularly check your credit score, pay bills on time, and reduce existing debt to improve your score.
2. Compare Loan Offers: Always compare interest rates from various NBFCs. Different lenders may offer different rates based on their risk assessment criteria.
3. Negotiate with Lenders: If you have a good credit profile, don’t hesitate to negotiate for a better interest rate.
4. Choose the Right Tenure: While longer tenures reduce your monthly EMI, they can increase your total interest payout. Use the personal loan EMI calculator to strike the right balance between EMI affordability and interest savings.

Conclusion

A personal loan can be a great way to manage your financial needs but understanding the interest rates and how they affect your monthly EMI is essential. Use a personal loan EMI calculator to get a clear picture of your financial commitment before applying for a loan. Always compare offers from multiple NBFCs and choose a loan that aligns with your financial goals.