Personal Loan Interest Rates in India (2026): Bank vs NBFC Comparison

The personal loan market in India has witnessed remarkable evolution over the past few years, with interest rates becoming increasingly competitive as banks and NBFCs battle for customer acquisition. Whether you’re planning a wedding, funding medical expenses, consolidating debt, or managing a financial emergency, understanding personal loan interest rates can save you lakhs of rupees over your loan tenure.

In 2026, personal loan interest rates in India range from as low as 10.25% to as high as 36% annually, depending on your credit profile, lender type, and loan amount. With the Reserve Bank of India’s recent monetary policy decisions impacting lending rates across the financial sector, borrowers have more options than ever—but also more complexity to navigate.

This comprehensive guide breaks down everything you need to know about personal loan interest rates in India, comparing traditional banks with NBFCs, explaining eligibility criteria, and revealing strategies to secure the lowest possible rates. Whether you’re a first-time borrower or looking to refinance existing debt, this article will empower you to make informed financial decisions.

What Is a Personal Loan?

A personal loan is an unsecured credit facility offered by banks and non-banking financial companies (NBFCs) that allows you to borrow money without providing collateral like property or gold. Unlike home loans or car loans that are tied to specific purchases, personal loans offer complete flexibility in how you use the funds.

Common Uses of Personal Loans in India

Indians utilize personal loans for diverse purposes including wedding expenses (the largest category), medical emergencies, home renovation projects, debt consolidation, education fees, travel expenses, and business startup costs. The unsecured nature means faster processing and disbursement, often within 24-48 hours for pre-approved customers.

Personal Loan vs Credit Card Loan

While both are unsecured credit options, personal loans offer lower interest rates (10-25%) compared to credit cards (24-48% annually). Personal loans provide a fixed EMI structure with defined repayment tenure, making budgeting easier. Credit cards offer revolving credit with flexibility but can trap borrowers in minimum payment cycles with compounding interest. Choose personal loans for large, one-time expenses and credit cards for ongoing monthly expenses with full payment capability.

Current Personal Loan Interest Rates in India (2026)

Interest rates fluctuate based on market conditions, RBI policies, and individual lender strategies. Here’s a detailed breakdown of current rates from major lenders.

Bank Personal Loan Interest Rates

State Bank of India (SBI) SBI offers personal loans at interest rates starting from 11.05% per annum for amounts up to ₹20 lakh. The bank provides preferential rates to salary account holders and customers with excellent credit scores. Processing fees range from 1.50% with GST. Loan tenure extends up to 6 years, and digital applications receive faster approval, often within 48 hours.

HDFC Bank HDFC Bank’s personal loan interest rates begin at 10.75% annually for pre-approved customers and can go up to 21% for standard applicants. The bank offers instant personal loans to existing customers with good banking relationships. Loan amounts range from ₹50,000 to ₹40 lakh with tenure options of 12 to 60 months. The minimal documentation process and quick disbursal make HDFC popular among salaried professionals.

ICICI Bank ICICI Bank provides personal loans starting at 10.85% per annum with amounts up to ₹50 lakh. The bank’s Insta Personal Loan facility offers pre-approved loans to eligible customers within minutes through their mobile banking app. They also provide flexi-loan options where you pay interest only on utilized amounts. Processing fees are approximately 2% of the loan amount.

Axis Bank Axis Bank’s personal loan interest rates start from 10.99% annually and can extend up to 22% based on credit profile. The bank offers attractive rates to salary account holders from top-tier companies. Loan amounts range from ₹50,000 to ₹40 lakh with flexible repayment tenure up to 5 years. Their Insta Easy Credit facility provides overdraft-style personal loans with lower interest on unutilized portions.

Kotak Mahindra Bank Kotak Bank offers personal loans at rates starting from 10.99% per annum for prime customers. Their unique feature includes top-up loan facilities for existing customers at competitive rates. Loan amounts go up to ₹40 lakh with processing fees around 2.5% plus GST. The bank’s digital-first approach ensures quick sanctions and minimal physical documentation.

NBFC Personal Loan Interest Rates

Bajaj Finserv Bajaj Finserv leads the NBFC space with personal loan interest rates starting from 11% annually. They offer pre-approved loans to existing customers with credit limits up to ₹40 lakh. The Flexi Loan facility allows withdrawal of funds as needed with interest charged only on utilized amounts. Processing fees start at 3.93% with minimal documentation requirements. Their strong digital infrastructure ensures approval within 5 minutes for eligible applicants.

Tata Capital Tata Capital provides personal loans at interest rates ranging from 10.99% to 28% based on customer profiles. Loan amounts vary from ₹75,000 to ₹35 lakh with tenure up to 6 years. The company offers special rates for salaried employees from Tata Group companies and Fortune 500 organizations. Processing fees are competitive at around 2.75% of the loan amount.

HDB Financial Services HDB Financial offers personal loans starting at 11.50% per annum with maximum amounts up to ₹20 lakh. They specialize in serving customers who may not meet stringent bank criteria, offering slightly higher rates for moderate credit profiles. The approval process is relatively lenient compared to traditional banks, making them accessible for a broader customer base.

Fullerton India Fullerton India’s personal loan interest rates range from 11.99% to 36% depending on creditworthiness. They provide loans from ₹50,000 to ₹25 lakh with flexible tenure options. Fullerton is known for serving customers across credit spectrums, including those with lower CIBIL scores, though at higher interest rates reflecting the increased risk.

Comparison Table: Banks vs NBFCs Personal Loan Interest Rates

Lowest Personal Loan Interest Rate in India

The lowest personal loan interest rates in India currently hover around 10.25% to 10.75% annually, offered primarily by leading private sector banks like HDFC, ICICI, and Axis to their premium customers. However, accessing these rock-bottom rates requires meeting specific criteria.

Salary Account Advantage

Maintaining a salary account with a bank significantly improves your chances of securing lower interest rates. Banks view salary account holders as lower-risk customers with verified income sources. Many banks offer 0.25% to 1% interest rate reductions for salary account holders, potentially saving thousands over the loan tenure. Additionally, salary account customers often receive pre-approved loan offers with minimal documentation.

Pre-Approved Loan Benefits

Pre-approved personal loans come with preferential interest rates, often 1-2% lower than standard offerings. These loans are extended to existing customers with excellent credit history, regular banking relationships, and stable income patterns. Banks analyze your transaction history, credit behavior, and relationship value before extending pre-approved offers. The approval is nearly instantaneous since due diligence is already completed.

Factors Affecting Personal Loan Interest Rates

Understanding what influences your personal loan interest rate empowers you to improve your profile and negotiate better terms.

CIBIL Score Impact

Your CIBIL score is the single most critical factor determining your interest rate. Scores above 750 unlock the lowest rates as they indicate excellent credit behavior. Scores between 700-750 receive moderate rates with standard terms. Below 700, expect higher rates or potential rejection. Each 50-point improvement in CIBIL score can reduce your interest rate by 0.5-2%, translating to significant savings. Regularly check your credit report, dispute errors promptly, and maintain healthy credit utilization below 30%.

Income and Employment Type

Higher income levels qualify you for lower interest rates as they indicate stronger repayment capacity. Salaried employees from reputed organizations (government, PSUs, Fortune 500 companies) receive preferential rates compared to those from smaller establishments. Self-employed professionals and business owners typically face 1-3% higher rates due to perceived income instability, though this varies based on business vintage and ITR history.

Loan Amount and Tenure

Larger loan amounts sometimes attract slightly lower interest rates as they generate more revenue for lenders. However, longer tenures increase total interest outgo despite potentially lower EMIs. A ₹5 lakh loan at 12% for 3 years costs ₹1,99,430 in interest, while the same loan for 5 years costs ₹3,34,550—a difference of ₹1,35,120. Choose the shortest affordable tenure to minimize total interest costs.

Employer Profile

Employees of government organizations, PSUs, and top-tier private companies receive preferential rates (often 1-2% lower) due to perceived job stability. Banks maintain lists of “preferred employers” whose employees automatically qualify for better terms. If you work for such organizations, leverage this advantage when negotiating rates.

Existing Loans and Debt-to-Income Ratio

High existing debt negatively impacts your eligibility and increases interest rates. Lenders calculate your debt-to-income ratio (total EMI obligations divided by monthly income). Ideally, keep this below 40-50%. Multiple existing loans signal higher risk, prompting lenders to charge premium rates or reduce loan amounts. Consider consolidating debts before applying for new loans.

Personal Loan EMI Calculation (With Example)

Understanding EMI calculations helps you plan finances effectively and compare loan offers accurately.

EMI Formula

The standard EMI formula is: EMI = [P x R x (1+R)^N] / [(1+R)^N-1]

Where P = Principal loan amount, R = Monthly interest rate (annual rate divided by 12), N = Loan tenure in months

While the formula appears complex, numerous online calculators simplify this instantly. However, understanding the components helps you grasp how interest rates and tenure impact your monthly obligations.

EMI Example Table

Notice how a 3% interest rate difference on a ₹10 lakh loan costs an additional ₹92,726 over 5 years—emphasizing why securing the lowest possible rate matters significantly.

Personal Loan EMI Calculator (Online Tools)

Major banks and financial websites offer free EMI calculators. Reliable options include BankBazaar, Paisabazaar, individual bank websites (HDFC, ICICI, SBI), and financial news portals like Economic Times. These calculators instantly show EMI amounts, interest costs, and amortization schedules. Use multiple calculators to verify results and understand how varying tenure and interest rates impact your repayment burden.

Personal Loan Eligibility Criteria in India

Meeting eligibility criteria is the first step toward loan approval. Requirements vary slightly across lenders but follow general patterns.

Age Requirements

Most lenders require applicants to be between 21 to 60 years for salaried individuals and 25 to 65 years for self-employed professionals. Some banks extend the upper age limit to 65 years. Your age at loan maturity should not exceed the maximum limit—if you’re 58, you’ll likely only get a 2-year loan maximum.

Minimum Salary Criteria

Entry-level personal loans require minimum monthly income of ₹15,000 to ₹25,000, though this varies by city and lender. Metros like Mumbai, Delhi, Bangalore typically have higher thresholds (₹25,000-₹30,000) while smaller cities accept ₹15,000-₹20,000. Self-employed individuals need minimum annual ITR of ₹2-3 lakh, with business vintage of at least 2-3 years.

Employment Type Requirements

Salaried employees from permanent positions receive preferential treatment with easier approvals and better rates. Probationary employees face challenges, often requiring completion of probation or minimum 6-12 months’ employment. Self-employed professionals need proof of business stability through ITR, GST returns, and bank statements showing consistent revenue patterns.

Credit Score Requirements

While banks officially claim minimum CIBIL scores of 650-700, practically, scores below 720 face higher rejection rates or elevated interest rates. Prime customers with scores above 750 access the best rates and highest loan amounts. First-time borrowers without credit history can start with smaller loans or secured credit products to build their profile.

Documents Required for Personal Loan

Proper documentation accelerates approval processes. Here’s what you’ll typically need:

Identity Proof

Aadhaar card (most commonly accepted), PAN card (mandatory for all loans), Passport, Voter ID, or Driving License. Most lenders now accept digital documents and conduct video KYC for verification.

Address Proof

Recent utility bills (electricity, gas, telephone) not older than 3 months, Aadhaar card, Passport, rental agreement with landlord documents, or property documents if owned. Address proof must match current residential address.

Income Proof

Salaried individuals need last 3-6 months’ salary slips and bank statements showing salary credits. Self-employed professionals require last 2 years’ ITR with computation, GST returns if applicable, and bank statements showing business transactions for 6-12 months.

Bank Statements

Most lenders require 6 months’ bank statements showing salary credits, transaction patterns, and existing loan EMI debits. These statements help lenders assess your financial behavior, spending patterns, and repayment capacity. Ensure statements show healthy balance maintenance and minimal return transactions.

Bank vs NBFC – Which Is Better for Personal Loan?

Both banks and NBFCs serve different customer segments with unique advantages. Here’s a comprehensive comparison:

Choose Banks if: You have excellent credit score (750+), stable salaried employment, need large loan amounts, prefer lower interest rates, and can wait 48-72 hours for approval.

Choose NBFCs if: Your credit score is moderate (650-750), need instant approval, require flexible repayment options, have self-employment or non-standard income sources, or previous bank applications were rejected.

How to Get Lowest Personal Loan Interest Rate in India

Securing the best possible rate requires strategic preparation and smart application practices.

Improve Your CIBIL Score

Start at least 6 months before applying. Pay all existing EMIs and credit card bills on time without fail. Reduce credit utilization below 30% of available limits. Dispute and correct any errors in your credit report. Avoid closing old credit cards as credit history length matters. Don’t apply for multiple loans or credit cards simultaneously as each inquiry marginally reduces your score.

Choose Shorter Tenure

While longer tenures offer lower EMIs, they significantly increase total interest costs. If you can afford higher EMIs, opt for the shortest possible tenure. This not only saves on interest but also demonstrates strong repayment capacity to lenders, potentially qualifying you for better rates.

Apply With Your Salary Account Bank

Banks offer preferential rates to existing customers, especially salary account holders. They have visibility into your income stability, spending patterns, and financial behavior. This relationship often translates to 0.5-2% lower interest rates and faster approvals with minimal documentation.

Compare Multiple Lenders Before Applying

Never settle for the first offer. Use comparison platforms like BankBazaar, Paisabazaar, or individual lender websites to compare rates, processing fees, and terms. Even a 1% difference in interest rate significantly impacts total cost. Calculate total outgo (principal + interest + processing fees) rather than just comparing interest rates.

Avoid Multiple Applications Simultaneously

Each loan application creates a hard inquiry on your credit report. Multiple inquiries within short periods signal credit hunger and desperation, reducing your score and approval chances. Instead, check eligibility criteria carefully, apply to 2-3 best-matched lenders sequentially, and wait for responses before additional applications.

Personal Loan for Low CIBIL Score

Low CIBIL scores (below 700) complicate personal loan approvals but don’t make them impossible.

Is It Possible?

Yes, several NBFCs and specialized lenders offer personal loans to customers with CIBIL scores between 550-700. However, expect higher interest rates (18-36%), lower loan amounts (typically ₹50,000-₹3 lakh), shorter tenures, and higher processing fees. Some lenders may require a co-applicant with better credit or additional income documentation.

Higher Interest Rate Risk

Low CIBIL borrowers pay significantly more—often 8-15% higher rates than prime customers. On a ₹5 lakh loan over 5 years, the difference between 12% and 25% interest is approximately ₹3.5 lakh in additional interest payments. This makes improving your credit score before applying far more economical.

Alternatives to Consider

If rejected for unsecured personal loans, consider secured loan options like loans against fixed deposits, gold loans, or loans against securities where your collateral reduces lender risk, enabling approvals despite lower scores. Alternatively, smaller loan amounts from NBFCs or fintech lenders specializing in alternative credit scoring may work. Focus on improving credit score over 6-12 months before reapplying for better terms.

Personal Loan vs Credit Card Loan

Understanding when to use each credit type optimizes your borrowing costs and financial management.

Interest Rate Comparison

Personal loans charge 10-25% annually with fixed EMI structures, while credit cards levy 24-48% on outstanding balances with compounding effects if minimum payment cycles are used. For large expenses (above ₹50,000) needed for defined periods, personal loans are substantially cheaper.

EMI Flexibility

Personal loans mandate fixed monthly EMIs throughout tenure, ensuring disciplined repayment but less flexibility. Credit cards offer complete flexibility—pay minimum, partial, or full—but this flexibility often leads to debt accumulation through minimum payment traps. Credit card EMI conversions typically charge 12-18%, better than revolving credit but higher than personal loans.

When to Choose Which

Use personal loans for: large one-time expenses (₹1 lakh+), medical emergencies, debt consolidation, home renovation, wedding expenses, or any expense requiring structured repayment over 1-5 years. Use credit cards for: regular monthly expenses you can pay fully, short-term needs (30-50 days interest-free period), small emergencies, travel bookings with rewards, or when building credit history. Never use credit cards for amounts you cannot repay within 2-3 months unless converting to EMI.

Common Mistakes to Avoid While Taking Personal Loan

Avoiding these pitfalls saves money and prevents debt traps.

Ignoring Processing Fees and Hidden Charges

Don’t focus solely on interest rates. Processing fees (1.5-4% of loan amount), GST on fees, documentation charges, and pre-closure penalties significantly impact total costs. A loan with 11% interest and 3.5% processing fee may cost more than one with 12% interest and 1.5% fee. Calculate the Annual Percentage Rate (APR) which includes all charges for accurate comparison.

Choosing Excessively Long Tenure for Lower EMI

While 7-year tenure offers attractively low EMIs, you’ll pay nearly double in interest compared to a 3-year loan. Longer tenures also mean prolonged debt burden and reduced borrowing capacity for other goals. Choose the shortest tenure you can comfortably afford after accounting for emergency savings.

Not Checking Prepayment Charges

Many loans levy 2-5% prepayment penalties if you close the loan before tenure completion. This restricts your ability to save on interest through early repayment when you have surplus funds. Specifically ask about prepayment terms and negotiate zero or minimal charges, especially if planning to close the loan early.

Borrowing More Than Required

Banks often approve higher amounts than requested, tempting you to borrow more “just in case.” Remember, every rupee borrowed costs 1.10-1.30 times (or more) by loan end. Borrow only what you specifically need. The “extra” borrowed money is expensive credit, not savings.

Not Reading Loan Agreement Thoroughly

Loan agreements contain critical terms about interest calculation methods (reducing balance vs flat rate), penalty charges, circumstances triggering interest rate changes, and lender rights. Spend time understanding key clauses or have someone knowledgeable review them. Once signed, you’re legally bound to these terms.

Frequently Asked Questions

What is the lowest personal loan interest rate in India?

The lowest personal loan interest rates in India currently range from 10.25% to 10.75% per annum, offered by leading banks like HDFC Bank, ICICI Bank, and Axis Bank to their premium customers with excellent credit scores (above 750), stable salaried employment, and existing banking relationships. These rates are typically available for pre-approved loans to salary account holders from reputed organizations. However, average customers with good credit profiles can expect rates between 11-15%.

Is personal loan interest rate fixed or floating?

Most personal loans in India come with fixed interest rates, meaning your EMI remains constant throughout the loan tenure regardless of market rate fluctuations. This provides predictability in financial planning. Some lenders offer floating rate personal loans linked to external benchmarks like RBI’s repo rate, where your interest rate and EMI can vary based on policy rate changes. Fixed rates are more common and preferred by borrowers for stability.

Can I get a personal loan without a CIBIL score?

Yes, it’s possible to get personal loans without a CIBIL score if you’re a first-time borrower with no credit history. However, options are limited and rates are higher. Some NBFCs and fintech lenders use alternative credit assessment methods including bank statement analysis, employment verification, and digital footprint evaluation. Starting with smaller loan amounts (₹50,000-₹2 lakh) from specialized lenders or secured loans against fixed deposits helps build credit history for better future access.

Which bank is best for personal loan in India?

The “best” bank depends on your profile and requirements. HDFC Bank offers competitive rates and quick processing for salaried individuals. SBI provides lower rates for existing customers. ICICI Bank excels in digital convenience and instant approvals. Axis Bank serves customers from premium employers exceptionally well. Kotak Mahindra Bank offers flexible top-up facilities. Compare rates, processing fees, eligibility, and turnaround time before deciding. Your salary account bank often provides the best deal due to relationship benefits.

How fast can I get a personal loan?

Approval and disbursal speed varies by lender and application type. Pre-approved loans from your existing bank can be disbursed within 5 minutes to 2 hours through digital channels. Standard applications from banks typically take 24-72 hours including verification processes. NBFCs like Bajaj Finserv offer instant approvals (within 5 minutes) for eligible customers with quick disbursal. For fastest processing, apply online with your salary account bank with all documents ready, ensure your mobile number and email are updated, and have good credit score above 750.

Conclusion

Navigating personal loan interest rates in India requires understanding multiple factors—from CIBIL scores and lender types to tenure choices and application strategies. In 2026’s competitive lending landscape, rates ranging from 10.25% to 36% offer something for every credit profile, though the difference in total costs can be astronomical.

The key takeaway: invest time in improving your credit profile, compare multiple lenders thoroughly, and never borrow more than necessary or for longer than required. A 2-3% difference in interest rate on a ₹10 lakh loan can save or cost you over ₹1.5 lakh over 5 years—money better spent on your actual goals rather than interest payments.

Banks offer lower rates and larger amounts for prime customers, while NBFCs provide accessibility and speed for those with moderate credit profiles. Neither is universally better—your choice should align with your credit standing, urgency, and loan requirements.

Remember that personal loans are powerful financial tools when used wisely but can become debt traps if mismanaged. Borrow responsibly, repay diligently, and always maintain emergency savings alongside loan obligations. Before clicking “apply,” ask yourself if the expense is truly necessary and if you’ve explored all lower-cost alternatives.

Smart borrowing begins with informed decisions. Compare rates, understand terms, and choose wisely—your financial future depends on it.