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March 24, 2025
Banks offer quick and convenient funds as Personal Loans for all individual needs or shortages. It is essential to note that the charges for a Personal Loan vary from lender to lender and also depend on the applicant’s profile. Getting funds at the lowest costs is a priority, so how can you calculate the rate at which you will be given funds and the key points that will determine the cost of your loan? Taking note of the following will help you secure the best deal for your Personal Loan Requirements.
When Applying for a Personal Loan, it’s essential to prioritise your needs. This will help you determine which charges will have the most significant impact on the total cost. Here are some basic costs that can help you understand the difference.
The Interest Rate is the primary cost of funds. The Current Personal Loan Rate Ranges from 10.99% to 16% Annually.
Your Net Salary: Banks issue a lower interest rate to high-income applicants. Most lenders classify interest rates according to income therefore, an individual with a net income of ₹ 35k applying for an HDFC Bank Personal Loan can expect a higher interest rate than an applicant with a monthly salary of ₹ 50k.
The Loan Amount You are Eligible for: The sanctioned loan amount for an applicant significantly impacts the Personal Loan Interest Rate. Customers with an income of ₹75,000 and above are considered elite, eligible for a loan amount of ₹10 lakhs and above. They are offered the lowest available interest rate of 10.99%, while applicants seeking lesser amounts of ₹5 lakhs will incur an interest rate of 11.99%.
Your Company Category plays a significant role in the unsecured lending sector of Personal Loans. Being employed by a company listed in the Economic Times or an organisation categorised as Category A on the Approved HDFC Bank Company Category List for Personal Loans, or as an Elite company on the ICICI Bank Company Category List, can help you secure the best terms for your loan. This knowledge empowers you to be strategic and proactive in your loan application.
Important to Note: As the interest rate is a significant expense, the information above will assist you in finding the most suitable lender based on your income and loan requirements. For instance, if you are employed by a company listed in the HDFC Bank’s Company Category, the lowest interest rate for your personal loan is offered by HDFC Bank. However, if you work for a non-listed firm and your monthly salary exceeds ₹ 50,000, the lowest interest rate for your personal loan is provided by ICICI Bank.
Processing Fees: The processing fees are a one-time file charge levied by Banks this is the file charge or expenses incurred by the Bank for issuing the loan. The processing fees for a Personal Loan can be up to 2% of the amount disbursed. Still, discounts are offered to eligible customers working with companies that feature in the approved company category list of the Bank, specially targeted segments such as government employees and high-salaried customers applying for a personal loan of ₹10 lakhs and above.
Rather than charging a percentage of the loan, premier Banks such as HDFC Bank and ICICI Bank now charge a flat amount of ₹ 4000/—to ₹ 10000/-, depending on the loan amount appended to the customer. When you apply for a YES Bank Personal Loan, the processing fees are 1% to 1.5% of the loan amount forwarded to the customer.
What You Need to Evaluate: Applicants often consider the interest rate when Applying for a Personal Loan, but overlook the processing fees. It is important to note that the processing fees are an upfront charge deducted from the loan issued, which will affect the loan amount you expect to receive in your account. Ensure you incorporate the processing fees into the total loan amount you require. If a significant loan amount is necessary, the percentage charged as processing fees will increase the overall loan costs. Therefore, seek a bank to help minimise these costs and charge you a minimal processing fee.
The Monthly Installment Payable (EMI): A Personal Loan Repayment is made through the EMI, which is deducted on a fixed date from the salary account. The total cost of your loan will vary depending on the amount you can repay monthly as an EMI towards the amount borrowed as a Personal Loan. The interest charged for a Personal Loan is applied annually, so the shorter the repayment tenure or the quicker you can repay your loan, the less the cost.
Selecting a tenure option is not just about the cost of the Personal Loan. It’s also about ensuring that your monthly EMI is comfortably affordable. By reflecting on your monthly budget and any other credit EMIs that need to be paid, you can make a responsible decision that keeps you in control of your finances.
When allotting tenure, the bank will also consider your monthly income, other obligations, and the employer’s company category. An applicant can request a repayment tenure, but the final option rests with the Bank. The EMI Calculator can help you check for a suitable EMI for the loan amount required before applying for a loan. If you feel the EMI is too steep, you can apply for a lesser loan amount.
Check The illustration Given for Variation in Costs
Other factors include prepayment penalties and repaying part of the loan. If the loan is needed for a limited period, you can compare the policies of various banks regarding the foreclosure clause. Look for a lender who will allow you to repay the loan amount with the least penalty. If your CIBIL Score is well above the required benchmark, Banks are confident in lending large amounts for a longer tenure with favourable terms. In contrast, aberrations in the score and history can make funds costlier.
Applicants can now quickly check for Personal Loan information online, as Banks and NBFCs update their websites with the Personal Loan Interest Rate and terms offered. Making an informed decision and checking out the complete cost before Applying for a Personal Loan will go a long way in lowering your Personal Loan Costs.
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