A friend in need is a friend indeed! Just so is the function of a Personal Loan. A Personal loan comes handy when your financial needs are undefined and urgent. Whether it is to satiate your impulsive streak or to mend the long pending walls of your farmhouse, a Personal Loan can be used for any purpose. The reason why you should opt for a Personal Loan are:
- They are easy to get.
- Personal Loan Interest Rates are attractive and affordable.
- They do not require lengthy documentation procedures.
- They are usually unsecured and hence can be easily availed.
- The usage of the loan amount rests to the will of the borrower.
- Repaying a Personal Loan is easier as the loan tenure is quite relaxed.
- Anyone can avail this loan irrespective of their nature of profession.
- The prepayment charges and other relevant fee are lower than other types of loans.
Types of Personal Loans:
Personal Loans are of various types, peculiar by their purpose. Some of the commonly used ones are- fixed rate loans, convertible loans, payday loans, installment loans, secured loans, unsecured loans and variable rate loans. Out of these, the major ones are secured personal loans and unsecured personal loans and hence need a more elaborate introduction.
Secured Personal Loan: Secured Personal Loans are majorly used to fund financial investment of a much serious nature such as purchase of a piece of land or a vehicle. These loans are secured by an asset making them less risky in the longer run.
Unsecured Personal Loan: As the name signifies, Unsecured Personal Loans do not need the support of a collateral to get approved. In other words, this type of loans are not secured by any asset making them unsecured in nature. Unsecured Personal Loans are generally used to fund financial needs such as the one arising while renovating a house or planning your dream vacation. The applicant doesn’t need to mention the purpose of taking credit while applying for the loan.
Which bank is the best for Personal Loan?
Putting a finger on the right bank while going for a Personal Loan is one of the toughest things to do. One needs to consider various things before finally putting their foot down. Here is a list of the most renowned and trusted banks of India to help you take the decision.
- HDFC Bank: HDFC Bank Personal Loan Interest Rate ranges between 15.75% to 20%. The bank offers a loan up to ₹ 25 lakhs for Salaried Individuals and ₹ 15 lakhs for the Self-Employed. The bank charges up to 2.50% as processing fee along with the relevant service tax.
- ICICI Bank: ICICI Bank Personal Loan Interest Rate ranges between 11.59% to 22%. A Salaried Professional can avail a loan of up to ₹ 20 lakhs while a Self-Employed Individual can avail a credit facility of up to ₹ 30 lakhs. A processing charge of about 2.25% is levied on the borrower along with the applicable service tax.
- Axis Bank: Axis Bank Personal Loan Interest Rate ranges between 15.50% to 24%. The bank offers a loan up to ₹ 15 lakhs to Salaried Individuals as well as the Self-Employed. The bank charges up to 1.50% to 2% as processing fee along with the relevant service tax.
- SBI: SBI Personal Loan Interest Rate ranges between 11.90% to 16.55% for Unsecured Personal Loans and 10.55% to 15.65% for Secured Personal Loans. The bank offers a loan up to ₹ 15 lakhs for Salaried Individuals as well as Self-Employed Individuals. The bank charges up to 1% as processing fee along with the relevant service tax.
- Kotak Mahindra Bank: Kotak Mahindra Bank Personal Loan Interest Rate ranges between 11.29% to 14.29%. An Individual can avail a loan amount of up to ₹ 15 lakhs. A processing charge of about 2% is levied on the borrower along with the applicable service tax.
How are Personal Loan Interest Rates Calculated?
The process of interest calculation for Personal Loans varies from bank to bank. The major methods of calculating Personal Loan Interest Rates are:
- Fixed Personal Loan Interest Rates: Under the fixed rate procedure, the interest is calculated on the principle amount for the entire loan tenure. This way the borrower ends up paying much more than he otherwise would.
- Floating Personal Loan Interest Rates: Floating rates solely depend on the market fluctuations and therefore the risk factor is high in this method of interest rate calculation. An improvement in the market conditions can benefit the borrower accordingly.
- Reduced Balance Interest Rates: Under this method, the interest rate is calculated on the calculated principal amount. As the calculated principal amount keeps reducing with each repayment, the interest rate also keeps reducing simultaneously. Hence, this is considered to be the best way of interest rate calculation.
Apart from the above mentioned methods, there are many other factors that affect the interest rates of Personal Loans. The power to ascertain the rate of interest remains with the bank. One can always use a Personal Loan EMI Calculator to plan his/ her monthly installments as per the determined interest rate and opt for the suitable bank.