PNB, HDFC Bank offer low personal loan rates: Should you opt for them?

Take a look at the current personal loan rates and charges from some well-known banks

Are you in need of quick funds to meet an unexpected financial requirement? A personal loan might be just the option you're looking for. Whether it's for home renovations, unexpected expenses, or consolidating debt, personal loans offer a versatile solution. However, do note that personal loans come with a cost.
 

"Personal loans are unsecured, making them easily accessible for those who need funds quickly. These loans are typically used in emergencies or when urgent funds are needed. However, the convenience of personal loans comes at a cost, as they often attract high interest rates, depending on the borrower’s credit score and the lender’s terms. This makes them one of the most expensive forms of borrowing," says Adhil Shetty, CEO, BankBazaar.com.

Here’s a look at the current personal loan rates and charges from some well-known banks, as provided by PaisaBazaar (as of August 14, 2024):

1. HDFC Bank

Interest rate: 10.50% onwards

EMI for Rs 5 lakh: Rs 10,747 onwards

EMI for Rs 1 lakh: Rs 2,149 onwards

Processing fee: Up to Rs 4,999

2. Tata Capital

Interest rate: 10.99% onwards

EMI for Rs 5 lakh: Rs 10,869 onwards

EMI for Rs 1 lakh: Rs 2,174 onwards

Processing fee: Up to 5.5%

3. State Bank of India

Interest rate: 11.35%-15.50%

EMI for Rs 5 lakh: Rs 10,959-12,027

EMI for Rs 1 lakh: Rs 2,192-2,405

Processing fee: 1.50% (minimum Rs 1,000 to maximum Rs 15,000)

4. ICICI Bank

Interest rate: 10.80% onwards

EMI for Rs 5 lakh: Rs 10,821 onwards

EMI for Rs 1 lakh: Rs 2,164 onwards

Processing fee: Up to 2%

5. Bank of Baroda

Interest rate: 11.15%-18.75%

EMI for Rs 5 lakh: Rs 10,909-12,902

EMI for Rs 1 lakh: Rs 2,182-2,580

Processing fee: Up to 2% (minimum Rs 1,000 and maximum Rs 10,000)

6. Axis Bank

Interest rate: 11.25% onwards

EMI for Rs 5 lakh: Rs 10,934 onwards

EMI for Rs 1 lakh: Rs 2,187 onwards

Processing fee: Up to 2%

7. Kotak Mahindra Bank

Interest rate: 10.99% onwards

EMI for Rs 5 lakh: Rs 10,869 onwards

EMI for Rs 1 lakh: Rs 2,174 onwards

Processing fee: Up to 3%

8. Bank of India

Interest rate: 10.85%-14.85%

EMI for Rs 5 lakh: Rs 10,834-11,856

EMI for Rs 1 lakh: Rs 2,167-2,371

Processing fee: 0.50%-1% (minimum Rs 250 and maximum Rs 10,000)

9. Canara Bank

Interest rate: 10.95%-16.40%

EMI for Rs 5 lakh: Rs 10,859-12,266

EMI for Rs 1 lakh: Rs 2,172-2,453

Processing fee: 0.50% (maximum Rs 2,500)

10. Punjab National Bank

 Interest rate: 10.40%-17.95%

 EMI for Rs 5 lakh: Rs 10,772-12,683

 EMI for Rs 1 lakh: Rs 2,144-2,537

 Processing fee: Up to 1%

11. HSBC Bank

 Interest rate: 9.99%-15.00%

 EMI for Rs 5 lakh: Rs 10,621-11,895

 EMI for Rs 1 lakh: Rs 2,124-2,379

 Processing fee: Up to 2%

12. Federal Bank

 Interest rate: 11.49% onwards

 EMI for Rs 5 lakh: Rs 10,994 onwards

 EMI for Rs 1 lakh: Rs 2,199 onwards

 Processing fee: Up to 3%

13. Union Bank of India

 Interest rate: 11.35%-15.45%

 EMI for Rs 5 lakh: Rs 10,959-12,013

 EMI for Rs 1 lakh: Rs 2,192-2,403

 Processing fee: Up to 1% (maximum Rs 7,500)

14. Bajaj Finserv

 Interest rate: 11% onwards

 EMI for Rs 5 lakh: Rs 10,871 onwards

 EMI for Rs 1 lakh: Rs 2,174 onwards

 Processing fee: Up to 3.93%

15. Punjab & Sind Bank

 Interest rate: 10.75%-13.50%

 EMI for Rs 5 lakh: Rs 10,809-11,505

 EMI for Rs 1 lakh: Rs 2,162-2,301

 Processing fee: 0.50%-1%

16. South Indian Bank

 Interest rate: 12.85%-20.60%

 EMI for Rs 5 lakh: Rs 11,338-13,414

 EMI for Rs 1 lakh: Rs 2,268-2,683

 Processing fee: Up to 2%

17. UCO Bank

 Interest rate: 12.45%-12.85%

 EMI for Rs 5 lakh: Rs 11,236-11,338

 EMI for Rs 1 lakh: Rs 2,247-2,268

 Processing fee: Up to 1% (minimum Rs 750)

18. IDFC First Bank

 Interest rate: 10.99% onwards

 EMI for Rs 5 lakh: Rs 10,869 onwards

 EMI for Rs 1 lakh: Rs 2,174 onwards

 Processing fee: Up to 2%

19. Bank of Maharashtra

 Interest rate: 10%-12.80%

 EMI for Rs 5 lakh: Rs 10,624-11,325

 EMI for Rs 1 lakh: Rs 2,125-2,265

 Processing fee: 1% (Rs 1,000-Rs 10,000)

20. Karnataka Bank

 Interest rate: 13.43%

 EMI for Rs 5 lakh: Rs 11,487

 EMI for Rs 1 lakh: Rs 2,297

 Processing fee: Up to 2% of loan amount (minimum Rs 2,500 & maximum Rs 8,500)

21. IndusInd Bank

 Interest rate: 10.49% onwards

 EMI for Rs 5 lakh: Rs 10,744 onwards

 EMI for Rs 1 lakh: Rs 2,149 onwards

 Processing fee: 1.5% - 3.5%

When should you rethink a personal loan?

While personal loans are handy, they’re not always the best option for everyone. Here’s when you might want to reconsider:

1. If your credit score isn’t good, you could end up with high interest rates that make the loan expensive.

2. If your monthly budget is already stretched thin, taking on more debt could make things harder.

3. Sometimes, specific loans like auto or student loans may offer better terms for your needs.

When considering a personal loan, you must weigh the risks and costs involved.

The high interest rates are one of the main concerns. These rates can significantly increase the total amount you repay over the loan term. "Personal loans typically come with shorter repayment periods, ranging from one to five years. Although this may seem manageable, it often results in higher EMIs, potentially straining your monthly budget," says Shetty.

He goes on to explain, “Another aspect to keep in mind is the impact on your credit score. Personal loans are recorded on your credit report, making timely repayments crucial. Missing even a single EMI can negatively affect your credit score, potentially hindering your ability to borrow in the future. Additionally, some lenders may impose penalties for prepayment or early repayment of the loan, adding to the overall cost.”

Why do people choose personal loans?

Debt consolidation  

One of the main reasons people opt for personal loans is to consolidate multiple high-interest debts into a single, lower-interest loan, saving money in the long run.

Home renovation

For homeowners eyeing upgrades or repairs, personal loans can finance home renovation projects without tapping into home equity. This route is especially appealing for those lacking substantial funds or preferring not to use their home as collateral.

Emergency expenses

Life’s unpredictabilities, such as urgent medical bills or sudden necessary repairs, can disrupt your financial stability. A personal loan can offer a lifeline, providing quick access to funds, often within a business day, helping you manage these unforeseen expenses without draining your savings.

Vehicle financing  

Personal loans can be used to finance vehicle purchases, offering flexibility without the need for a down payment.

An alternative to payday loans  

Personal loans can be a more cost-effective alternative to payday loans, helping avoid the debt cycle.

Moving costs  

Moving from one city to another for work or any other reason can be expensive, and a personal loan can help cover those costs.

Large purchases  

If you need to make a big purchase, spreading the cost with a personal loan can make it more manageable.

Wedding expenses  

Weddings in India are elaborate and characterised by a range of ceremonies and spending. Personal loans can provide the funds needed to plan your dream wedding.

Vacation costs  

For those once-in-a-lifetime trips or special vacations, a personal loan can make your travel dreams a reality, offering a way to fund your adventure now and pay over time.

What are the alternatives to personal loan?

Adhil Shetty explains the alternatives to personal loans:

1. Credit card loan: If you have a credit card with a high credit limit, some banks allow you to convert your outstanding balance into EMIs, often at a lower interest rate than a personal loan. However, this option should be used with caution, as credit card loans can still carry high interest rates if not managed properly.

2. Gold loan: Pledging gold as collateral can secure a loan at a lower interest rate compared to personal loans. The gold acts as security for the lender, and the approval process is usually quick, making it a suitable option for urgent financial needs.

3. Overdraft facility: If you have a savings account, your bank may offer an overdraft facility, allowing you to withdraw more than your account balance. Interest is charged only on the utilised amount, typically at a lower rate than personal loans, offering more flexibility and cost-effectiveness.

4. Loan against fixed deposit (FD): If you have fixed deposits with a bank, you can take a loan against them. The interest rate on such loans is usually 1% to 2% higher than the FD interest rate, making it significantly lower than that for personal loans. The FD serves as collateral, ensuring a quick and straightforward approval process.