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How to get the best personal loan? Get the Cheapest personal loan offers in India

Updated on March 22, 2016

How to get the best personal loan? Get the Cheapest personal loan offers in India

Personal loans are offered to individuals by Banks as well as NBFC (Non banking financial companies) in India. HDFC, Axis Bank, SBI, Canara Bank, Citibank are some of the popular institutions offering personal loans to customers. In India, personal loans are given in the range of approximately Rs 50,000 to INR 50,00,000. Loans are granted to both salaried as well as self customers. The good thing about personal loans is that you need not offer a security or guarantor for securing the loan. You can use it for whatever purpose you intend to. Personal loans are generally not available for students or retired persons.

Advertised interest rates vs Actual interest rates: Banks usually advertise their lowest/premium interest rates to customers. However, the actual interest rate will vary from person to person based on his income profile and credit standing. Further, interest rates could be based on the amount of personal loan applied for. A higher loan amount could lead to a higher or lower rate of interest.

What determines personal Loan approval? Two things mainly decide your eligibility for personal loans, one is your income/job profile and the other is your credit history

Profile: Banks look at the job profile of customer and his/her income before granting loans. For example, the minimum monthly income required for an SBI personal loan is INR 24,000 per month. Therefore, it’s advisable to provide photocopies of as many income proof/documents you have. The bank could even grant you a lower interest rate after perusing your records

Credit history: Banks will check your Cibil score to ensure your credit worthiness. A Good score is one of the essential conditions for personal loan approval because personal loans are unsecured loans which increase the risk factor for banks. In general customer credit scores range from 300 to 900. Most banks in India prefer a score of 750 or above

Bargaining power: Your bargaining ability will decide the best personal loan offer. Talk with more than one bank and get quotes from different banks for the kind of loan which you are applying for. You must shortlist two banks in the end. Banks may offer lower interest rates if they come to know that other banks are willing to offer a better rate for the same customer

Interest rates: Basically, there are two types of interest rates- Fixed and Floating. Fixed interest rates remain same through the period of the loan, whereas floating rates fluctuate. Generally, floating rates may be initially lower but they could be increased by the bank in future. If you wish to avail loan for a longer period, then go for a fixed interest rate.

Service charge: Banks will levy processing fee for personal loans and they may vary from one bank to another. SBI charges a processing fee of 2% to 3%

Check for hidden clauses: Normally, banks charge a pre-payment penalty of around 3-5 % if the customer wants to make prepayment. Generally, banks are not supposed to charge prepayment fees on floating rate loans. Since most personal loans are taken on fixed rate, this rule doesn’t apply. However, there are some banks that don’t levy prepayment charges.

Transfer your Balance to another bank: If you are already repaying an availed loan, you could transfer the balance to a new bank that offers a lower interest rate. For example, HDFC has the facility to transfer the balance from any bank and offers an interest rate that is 2% lower. The minimum interest rate is 14%

Personal Loan interest rates offered by major banks:

Personal Loan interest rates offered by major banks:

SBI - 17.80% (floating)

HDFC - 12.75 % - 20.00% (fixed)

State Bank of Hyderabad - 15.25% - 15.75% (floating)

Kotak Mahindra - 11.50% - 18.00% (fixed)

Canara Bank - 13.65% (floating)

Citibank - 12.75% - 15.75% (fixed)

IndusInd Bank - 12.99% - 18.25% (fixed)

Capital First - 13% - 20% (fixed)

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