Author
LoansJagat Team
Read Time
9 Min
16 Jun 2025
Best Banks & Nbfcs For Low-Interest Personal Loans (Updated List)
Rahul, a 35-year-old IT professional from Bangalore, is seeking a personal loan from a bank to finance a ₹500,000 wedding celebration for his brother. Before identifying the optimal lenders, Rahul assessed interest rates, evaluated EMIs, and scrutinised eligibility criteria.
He discovered various lenders who were offering personal loans at different interest rates:
BANK | INTEREST RATE (p.a.) | LOAN PROCESSING CHARGES | TENURE |
HDFC Bank | 10.85% to 24.00% | Up to ₹6,500 | Up to 72 months |
ICICI Bank | 10.85% to 16.25% | Up to 2.5% of the loan amount | Up to 72 months |
SBI | 11.45% to 14.85% | Up to 1.5% of the loan amount | Up to 84 months |
Axis Bank | 11.25% to 22.00% | Up to 2% of the loan amount | Up to 60 months |
Kotak Mahindra Bank | 10.99% to 16.99% | Up to 3% of the loan amount | Up to 60 months |
Bajaj Finserv | 12.00% to 20.00% | Up to 4.13% of the loan amount | Up to 60 months |
Tata Capital | 10.99% to 19.00% | Up to 2.5% of the loan amount | Up to 72 months |
Rahul wanted to understand his monthly financial commitment for a ₹5,00,000 loan over 5 years (60 months).
After performing the calculations, Rahul found the following approximate EMIs:
BANK | EMI |
HDFC Bank | ₹10,812 |
ICICI Bank | ₹10,812 |
SBI | ₹11,099 |
Axis Bank | ₹11,099 |
Kotak Mahindra Bank | ₹10,870 |
Bajaj Finserv | ₹11,122 |
Tata Capital | ₹10,870 |
(Calculations are based on the lower end of the interest range for each lender)
Taking into consideration the lowest interest rates (10.85%), reasonable processing fee (up to 2.50%), and manageable EMI (₹10,812), Rahul came to the conclusion that ICICI Bank offered the most favourable terms for his needs. However, he also noted that Tata Capital, an NBFC, provided competitive rates and terms comparable to traditional banks.
PERSONAL LOAN: WHY DO YOU NEED ONE?
It is an amount of money you borrow to use for a variety of purposes. They can be used to consolidate debt, pay for home renovations, or plan a dream wedding. Online lenders, credit unions, and traditional banks all provide personal loans.
Suppose Vinod takes a loan of ₹5,00,000 at an interest rate of 10% for 5 years; his total interest paid would be around ₹1,37,566, making his total repayment ₹6,37,566.
TOP BANKS OFFERING ROCK-BOTTOM INTEREST RATES
The following is a list of top banks that offer personal loans at low interest rates in 2025:
BANK | KEY FEATURES | INTEREST RATE (p.a.) | LOAN AMOUNT | PROCESSING FEE |
HDFC Bank | 1. Quick loan processing; 2. Minimal documentation; 3. Pre-approved instant loans for selected; customers; 4. Balance transfer facility to lower EMIs. | 10.85% onwards | Up to ₹40 lakh | Up to ₹6,500 |
ICICI Bank | 1. Minimal documentation; 2. Quick disbursal; 3. Special rates for existing customers; 4. Flexible repayment options. | 10.85% onwards | Up to ₹50 lakh | Up to 2.50% of the loan amount |
SBI | 1. Competitive interest rates; 2. Minimal processing fee; 3. Fast loan approval process; 4. Simple eligibility requirements. | 11.45% to 14.85% | Up to ₹35 lakh | Up to 1.50% of the loan amount |
Axis Bank | 1. Minimal paperwork required; 2. Quick approval; 3. Instant disbursal; 4. Transparent features. | 10.49% onwards | Up to ₹15 lakh | Up to 2.00% of the loan amount |
Kotak Mahindra Bank | 1. Minimal paperwork; 2. Quick approval; 3. Instant disbursal. | 10.99% onwards | Up to ₹40 lakh | Up to 3.00% of the loan amount |
BEST NBFCs OFFERING SUPER AFFORDABLE LOANS
NBFCs provide an excellent alternative to traditional banks, often with easier eligibility criteria and faster approval. Here are some of the best NBFCs for low-interest personal loans in 2025:
NBFC | KEY FEATURES | INTEREST RATE (p.a.) | PROCESSING FEE | LOAN TENURE | LOAN AMOUNT |
Bajaj Finserv | 1. Multiple part-payment options available; 2. Approval in just 5 minutes; 3. Flexible tenures. | 10.00% onwards | Up to 4.13% of the loan amount | Up to 5 years | Up to 55 lakhs |
Tata Capital | 1. Affordable interest rates with flexible tenures; 2. No hidden charges; 3. Minimal documentation; 3. Fast processing. | 11.99% onwards | Up to 4% of the loan | Up to 6 years | Up to 35 lakhs |
Muthoot Finance | 1. Competitive rates; 2. Customised repayment plans. | 14.00% onwards | Up to 3.5% of the loan | Up to 5 years | Up to 15 lakhs |
NBFCs often cater to borrowers with slightly lower credit scores compared to banks, making them a great choice for those who may not qualify for traditional bank loans.
HOW DO INTEREST RATES AFFECT YOUR LOAN?
The interest rate is the proportion of a loan amount that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
Supposing you borrowed ₹10,00,000 for a tenure of five years:
Borrowing at 10%, then the EMI will be ₹21,247; the total repayment amounts to ₹12,74,820.
At 12%, your EMI will rise to ₹22,244 with the total repayments amounting to ₹13,34,640.
A rise of 2% will cost you an additional ₹59,820!
FACTORS THAT DETERMINE INTEREST RATES
Lenders decide your interest rate based on several factors:
- Credit Score: Higher scores (750+) get lower rates.
For example, Ram, having a credit score of 780, gets a 9.75% interest rate, while Shyam, with a credit score of 650, may get an interest rate as high as 14%.
- Income Level: Usually, better rates come with a higher regular income.
For example, Raja, having an income of ₹1,00,000/month, may secure a 10% rate, while Pooja, who has a monthly income of ₹30,000, may get 13%.
Loan Amount & Tenure: Shorter tenures usually have higher rates
- Employer Profile: Working with reputed companies can get you better deals.
The Secret To Scoring The Lowest Interest Rates!
Interest rates can make a huge difference in your repayment amount. The lower the interest rate, the less you pay back over time. A low-interest loan means smaller EMIs (Equated Monthly Installments) and reduced financial burden.
Fixed Vs. Floating Interest Rates
Feature | Fixed Interest Rate | Floating Interest Rate |
Definition | The interest rate remains constant throughout the loan tenure. | The interest rate fluctuates based on market conditions. |
Stability | EMI remains fixed. | EMI varies over time. |
Cost in the Long Run | Higher initiate rate (1-2% more than floating). | Usually lower, leading to potential savings. |
Market Risk | No impact from interest rate changes. | Can increase if market rates rise. |
Benefit from Rate Drops | No benefit if the interest rate decreases. | EMI reduces if interest rates fall. |
Prepayment Charges | Usually applies for early repayment. | Minimal or no charges for repayment. |
Best For | Risk-averse borrowers, long-term loans (5+ years). | Risk-tolerant borrowers, short-term loans (1-5 years). |
Ideal Scenario | When interest rates are expected to rise. | When interest rates are expected to fall or remain stable. |
Loan Suitability | Home loans, personal loans for stability. | Business loans and education loans for flexibility. |
Suppose Muskan is taking a loan of ₹10,00,000 for 5 years. Let's have an overview of fixed and floating interest rates for her loan:
LOAN TYPE | INTEREST RATE | EMI | TOTAL REPAYMENT | TOTAL INTEREST PAID | |
FIXED | 10% p.a. | ₹21,247 | ₹12,74,820 | ₹2,74,820 | |
FLOATING | Year | 9% | ₹20,761 | ₹12,50,000 (approx.) | ₹2,50,000 |
Year | 8.5% | ₹20,482 | |||
Year | 8% | ₹20,280 | |||
Year | 9.5% | ₹20,968 | |||
Year | 10% | ₹21,247 | |||
By looking at all this data, we can conclude that:
If Muskan prefers stability and wants predictable EMIs, she can go with fixed rates; on the other hand, a floating rate is better if Muskan expects interest rates to stay low or decrease, saving him ₹24,320.
How Does Credit Score Impact Your Interest Rate?
A high credit score (750+) can get you the lowest interest rates, while a low score may lead to higher rates or even loan rejection.
Who Is Eligible? Check If You Qualify Instantly!
The general eligibility criteria include:
AGE | 21 to 60 years |
EMPLOYMENT | Salaried or self-employed individuals |
INCOME | Minimum monthly income of ₹25,000 (varies from lender to lender) |
CREDIT SCORE | 700 and above preferred |
Fast-Track Guide: How To Apply For A Personal Loan?
Go to the bank or NBFC website.
Check eligibility using their loan calculator.
Complete the application form.
Upload the relevant documents.
Wait for approval and disbursement.
Must-Have Documents: Don’t Apply Without These!
Identity Proof | Aadhar Card, PAN Card, Passport |
Address Proof | Utility Bills, Rental Agreement |
Income Proof | Salary Slips, Bank Statements, ITR |
Employment Proof | Offer Letter, Business Registration (for self-employed) |
Mistakes To Avoid
- Borrowing more than needed.
- Ignoring hidden charges and processing fees.
Suppose a ₹10 lakh loan with a 2% processing fee costs ₹20,000 upfront!
- Choosing a longer tenure just for lower EMIs.
For instance, a ₹5 lakh loan for 7 years at 10% = ₹1,99,339 interest, while for 5 years = ₹1,37,566 interest. A ₹61,773 extra cost!
- Not reading the fine print before signing.
Pros And Cons Of Taking A Personal Loan
Pros | Cons |
No Collateral Required Most personal loans are unsecured, so you don’t need to provide assets as security. | Higher Interest Rates They generally have higher interest rates compared to secured loans. |
Quick Approval & Disbursement Funds are typically disbursed within 24-48 hours, making them ideal for emergency situations. | Strict Eligibility Criteria Lenders typically require a good credit score, stable income, and a solid employment history for approval. |
Flexible Usage You can use the loan for any purpose, such as medical expenses, travel, weddings, or debt consolidation. | Risk of Debt Trap Easy accessibility may encourage excessive borrowing, which can lead to financial strain. |
Higher Loan Amounts Depending on your income and creditworthiness, you can get a substantial loan amount. | Additional Fees and Charges Processing fees, prepayment penalties, and late payment charges can add to the overall cost. |
Improves Credit Score Timely repayments can significantly boost your credit score, thereby enhancing your future loan eligibility. | Shorter Repayment Tenure Typically, repayment terms range from 1 to 5 years, leading to higher monthly EMI payments. |
Conclusion
Obtaining a personal loan at low interest rates can alleviate the financial burden and make loan repayments more manageable. By comparing lenders, maintaining a high credit score, and understanding the terms and conditions, you will be able to save thousands of rupees over the loan tenure.
Always borrow sensibly, taking into account your repayment capacity and your future financial goals. Whether it's a bank or an NBFC, ensure the loan fulfils your requirements and consider taking that next step. Evaluate your options, apply for the best deal possible, and begin taking charge of your finances right now!
FAQs
What is the lowest credit score needed for a personal loan?
- For reduced interest rates, most banks and NBFCs like credit scores of 700+.
In 2025, which bank offers the lowest interest rate?
- With rates as of right now starting at 10.25% p.a., Kotak Mahindra Bank provides one of the lowest rates.
Could I be granted a personal loan without a salary slip?
- Indeed, but you might also have to offer substitute evidence such as ITR returns or bank statements.
How long does approval of a loan take?
- Depending on the lender, approval might last several hours to many days.
Should one choose to apply for a personal loan from a bank or an NBFC?
- While NBFCs give simpler approval with less paperwork, banks usually have smaller interest rates.
About the Author
LoansJagat Team
We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?
Quick Apply Loan
Subscribe Now
