Compared to other loans that banks offer, personal loans have the highest interest rates because of the following reasons.
- Personal loans are available without any collateral. Hence, the risk factor is higher.
- Personal loans are instant loans available at short notice.
- Banks grant personal loans for all purposes except for speculation and illegal activities like gambling. The borrower does not have to disclose the purpose when applying for a personal loan.
Banks offer different types of personal loans, depending on the borrower’s profile. Therefore, the rates of interest on such loans vary accordingly. For example, here is a comparison of interest rates on the SBI Personal Loan vs. Axis Bank Personal Loan and HDFC Bank Personal Loan.
SBI Personal Loan
SBI offers a range of personal loans, as detailed below.
| SBI Personal Loan Product | Brief details | Rates of Interest |
| SBI KAVACH Personal Loan | Loans for COVID treatment to SBI customers and their family members | 100 bps lower than SBI Personal Loan, at present the rate of interest is 8.50% |
| Loans to Pensioners | Personal loans to pensioners drawing pension through SBI | 9.75% to 10.25% |
| SBI Xpress Credit | Personal loans to salaried persons drawing salary through SBI | Defence personnel – 10.60% to 11.60%
Other applicants – 10.60% to 13.10% |
| SBI Xpress Elite Scheme | Personal loans to all customers regardless of where they maintain their salary accounts | Salary A/c with SBI – 9.60% to 11.10%
Salary A/c with other banks – 9.85% to 11.35% |
| SBI Xpress Credit to Non-permanent employees | Personal loans to non-permanent employees of government departments and employees of unrated companies | Non-permanent government employees – 11.50% to 13.60%
Other unrated companies – 12.25% to 13.85% |
| Pre-approved Personal Loans on YONO | Available on the YONO app to pre-selected customers | 10.85% to 12.85% |
| SBI QUICK Personal Loan | Personal loans to customers not maintaining salary account with SBI | 9.85% to 11.35% |
| Other Unsecured personal loans | To all customers of SBI, depending on their eligibility. | 9.60% to 15.65% |
SBI Personal Loans interest rates are linked to the bank’s MCLR. The 2-year MCLR for SBI is 7.20%. SBI applies a spread over the MCLR depending on various factors to decide on each borrower’s individual personal loan interest rate. These factors include the following.
- The credit rating of the borrower
- The amount of loan
- The relationship history with SBI
The rates of interest are not subject to resets. Instead, they remain fixed throughout the loan tenure.
Axis Bank Personal Loan Interest Rates
Axis Bank links the personal loan interest rate to its 1-year MCLR. Similar to SBI, the rates of interest remain fixed throughout the loan tenure without any reset.
| Loan Product | 1-year MCLR | Spread | Effective ROI | Reset |
| Personal loan for tenures up to 36 months | 7.35% | 4.65% to 13.65% | 12% to 21% | No Reset |
| Personal loans with tenures above 36 months | 7.35% | 4.65% to 13.65% | 12% to 21% | No Reset |
In the case of default in the instalment payment, Axis Bank levies a penal interest @ 24% per annum on the overdue instalment.
HDFC Bank Personal Loan
HDFC Bank offers personal loans for varying purposes like Marriage loans, Travel loans, Emergency loans, Debt Consolidation Loans, Home Renovation loans, loans for students, teachers, women, salaried employees, and government employees. The HDFC Bank Personal Loan interest rates are as follows.
HDFC Bank charges a rack interest rate ranging from 10.50% to 21.00%. The rate of interest for the individual borrower depends on various factors.
- Customers drawing their salaries through HDFC Bank get a preferential interest rate than those drawing their salaries from other banks.
- Government employees and people working in public sector undertakings and reputed corporates benefit from a lower interest rate than their counterparts employed in the private sector and unrated companies.
- The repaying capacity plays a critical role in the determination of HDFC Bank Personal Loan interest rate.
- The credit rating of the borrower is critical. The higher the rating, the better is the interest rate offered to such customers.
Comparison between SBI Personal Loan interest rate with Axis Bank and HDFC Bank Personal Loan interest rates
- All these banks link their personal loan interest rates with their respective MCLRs (1-year or 2-years MCLR).
- The rates of interest on personal loans remain fixed throughout their tenure. Therefore, the changes in the MCLR do not affect the personal loan interest rates.
- SBI offers the lowest personal loan interest rates starting from 9.60% per annum, whereas Axis Bank and HDFC Bank Personal Loan interest rates start from 12% and 10.50%, respectively.
- The personal loan interest rates vary from one person to the other, depending on various external factors.
- The critical factors that affect personal loan interest to individuals include their credit rating, employment history, the nature of their employers, the bank where they maintain their salary accounts, and so on.
- Generally, borrowers employed with Government departments, public sector undertakings, and reputed corporates get lower interest rates on their personal loans.
- Similarly, borrowers drawing their salaries from the respective banks get a preference in the interest rate structure.
- Generally, the personal loan interest rates for non-salaried persons are higher compared to their salaried counterparts. It is because banks do not consider such people to have a regular source of income.
- The interest rates compared above are applicable only if the borrower repays the instalments on time. A default in the repayment of EMIs can result in the bank charging penal interest @ 2% per month on the overdue instalment amounts.
Personal Loan Interest Rates vs. other loans
The personal loan interest rates are higher than those offered on other loans because personal loans are unsecured. Therefore, the risk factor for the banks is higher. It translates into a higher spread over the bank’s base rate (in this case, the MCLR).
Nevertheless, personal loans are the quickest ways to raise immediate funding because the turnaround period for personal loans is the lowest of all other loans.