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What factor do you consider the most while seeking the best personal loan deal for you? A lot of you will come up with the answer ‘interest rate’. Well, that is. Interest rate is one of the most important factors which you must look for before choosing a particular lender as it helps in reducing the bigger segment from the actual cost of borrowing.

A lower rate of interest is desired by any loan seeker since it reduces the interest payable amount over the whole loan term. Below we have listed the top 10 Banks in India that you can consider if you are contemplating to avail a personal loan on lower interest rates in 2021.

Top 10 Banks in India for lower personal loan interest rate - 2021
Bank	Loan Amount	Interest Rate	Processing Fee
UCO Bank	Up to Rs. 10 lakhs	8.45% p.a. onwards	Up to 1%
Central Bank	Up to Rs. 20 lakhs	8.45% p.a. onwards	Up to 1%
Bank of India	Up to Rs. 10 lakhs	8.65% p.a. onwards	2%
Union Bank of India	Up to 15 lakhs	8.90% p.a. onwards	Up to 0.50%
Punjab National Bank	Rs. 25,000 – Rs. 15 lakhs	8.95% p.a. onwards	Up to 1%
Indian Bank	As per applicant’s profile	9.05% p.a. onwards	Up to 0.50%
Allahabad Bank	As per applicant’s profile	9.05% p.a. onwards	1.06%
Bank of Maharashtra	Up to Rs. 10 lakhs	9.55% p.a. onwards	1%
State Bank of India	Up to Rs. 20 lakhs	9.60% p.a. onwards	Up to 1.5%
Citi Bank	Rs. 10,000 – Rs. 30 lakhs	9.99% p.a. onwards	Up to 3%

Note: Aforementioned figures may vary in accordance with the Bank’s and RBI’s policies.

Above-listed Banks are among the top 10 Banks in India offering personal loans on lower interest rates. Although the interest rate is a crucial factor, we recommend you to consider other factors too such as repayment tenure, additional charges, etc.

If a bank is offering a low personal loan interest rate, even then you should seek around it. What to look for! Is that your question? Never mind! Take a look at the below pointers and eventually, you will easily understand how sometimes a low-interest rate on personal loans can also cost you higher.

Types of personal loan interest rates

You should look upon the type of personal loan interest rate that you are getting even if it’s a low-interest rate as it will determine the precise interest amount that you will need to pay alongside your principal amount. Personal loan interest rates are classified into two categories:

1. Fixed interest rate

If you are getting the fixed rate of interest, it means you will have to pay off with the same interest rate throughout your entire loan tenure.

As a result, your monthly instalment amount also remains fixed across the loan repayment term. So, this may aid you to structure your monthly expenses in the long term.

2. Floating interest rate

If your interest rate is floating in nature then the interest that you need to pay will depend upon either the standard determined by your lender or as per the current market circumstances.

Consequently, the floating interest rate is subjected to adapt sporadically which results in the increase/decrease of the loan repayment period or monthly instalments depending on whether the rate ascends or descends.

Calculation methods of interest

There are two methods to calculate the personal loan interest that are described below:

1. Flat rate method

With this method, the interest amount is computed on the total loan amount initially borrowed over the entire tenure of the loan.

Following is the formula to compute EMI based on flat-rate method:

EMI by Flat Rate Method = (principal + total interest payable)/repayment tenor in months

Where,

Total Interest Payable = principal x interest rate x repayment tenor/100

2. Reducing balance method

With this method, as you repay your loan amount in monthly instalments, the principal loan amount continues to reduce after each EMI payment. Consequently, the interest rate is computed on the decreasing loan amount and not on the total amount originally borrowed.

Following is the formula to compute EMI based on reducing balance method:

EMI by Reducing Balance Method = [principal x monthly interest rate x (1+ interest rate)^repayment tenor in months]/[(1+ monthly interest rate)^(repayment tenor in months-1)]

How to avail a personal loan with the low-interest rate in 2021?

In order to avail the best personal loan in India in 2021 on a low-interest rate, things that you must pre-perform are as follows:

1. Preserve a high credit score (700+).
2. Hold a low credit usage ratio.
3. Preserve a low fixed obligation to income ratio (FOIR).
4. Don’t apply for personal loans with multiple lenders simultaneously or frequently.

Additionally, while choosing for a personal loan, you can also consider going with the bank you are already associated with, as there are higher chances that the bank will extend you the personal loan with best offers as compared to other lenders.

The out-turn

To conclude, there is an abundance of financial institutions in India for personal loans but what a customer seeks while opting one is that it should cost him/her as low as possible. Aforementioned top 10 banks in India offer personal loans with a low-interest rate. Although, you can opt for any other bank too if you get a better offer.

Secondly, you need to be clear that a bank considers multiple factors while considering to extend you a personal loan on low-interest-rate such as your profession, income source, credit history, credit score, etc. so you should pre-work on all these factors so that if you come across an emergency in 2021, you can readily avail the best personal loan.

Eventually, you also need to understand that alongside low-interest rate, you must consider other components too, i.e., processing fee, repayment tenure, interest type, etc.