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What are the Personal Loan Interest Rates? How to Calculate it?

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February 17, 2023


What’s Inside

The decision to take a personal loan is challenging. But getting an attractive interest rate to can help smoothen the decision making process. The current market interest rates range between 8.75% to 13% in banks and reputed financial institutions in India. 

You can calculate the interest rate for a personal loan using a simple formula:

Total accrued amount = Principal Amount * (1 + rate of interest x number of years)

For example, if you’ve borrowed a principal of ₹15,000 at a 9.1% interest rate for 2.5 years, then your total accrued amount is:

₹15,000 x (1+0.091x2.5) = ₹18,412.50

Alternatively, you can use a pre-designed calculator to work out your EMI per month. Interested to learn the factors that decide a bank’s interest rate on a personal loan? Keep reading!

The Expected Interest Rates: Attractive or Repulsive?

Loan providers prefer to lend money at low-interest rates to trusted customers who have a history of making regular payments.

So, don’t be surprised when you notice loan providers going as low as 8.75% and as high as 49.5% on the interest rate for personal loans depending on the borrower’s creditworthiness.

While these estimated figures might seem higher than that of secured loans, the risks associated with personal loans largely justify the interest rates. For instance, personal loans are mainly used to address an emergency and are provided without collateral. So, loan providers look to make the most of this flexibility by charging relatively higher interest rates.

The Secret Behind Calculation of Interest Rates

Every time a bank offers a personal loan to you or accepts your loan request, they will offer you two interest rate models - fixed and fluctuating.

When you opt for fluctuating interest rates, the market movement decides the percentage of your interest. Granted, you could be paying high rates in several instances. But the low rates in other instances more than makeup for this discrepancy.

Regardless of the model you choose, you will notice that banks will analyse the following documents before deciding your rate of interest.

  • Credit score (on a scale from 300 - 850, the higher, the better)
  • The income per annum (depends on the loan amount needed)
  • Debt-to-income ratio (the amount of your salary that goes towards monthly bills and other obligations)
  • Age (the younger you are, the longer the duration of repayment)

If you fulfil all these criteria, you might be convinced to ask what is the current interest rate on a personal loan to get a better idea of the market rates at the moment. The current interest rates are more in the vicinity of 10%, but you can negotiate if you have a strong credit score and a high income. 

Get Personal Loans with Competitive Interest Rates

Personal loans are great when you need immediate liquid funds. However, given the high interest rates and stipulated deadlines every month, the repayment of these loans can easily cause undue financial stress. To avoid such problems, it is vital to create a monthly budget to maintain financial discipline and complete the payments before the monthly deadline.

Eager to get a personal loan without much hassle? You can get an instant loan directly to your Savings Account through the Fi Money app. The best part? This process is 100% paperless and boasts competitive interest rates. Stay in charge of your loans with a transparent borrowing process!

Frequently asked questions

1. What is the average interest rate on personal loans?

Most financial institutions offer loans at interest rates between 10% to 24% per annum.

2. What is the lowest interest rate available on personal loans?

If you have a high credit score, high income and a low debt-to-income ratio, you might be able to secure personal loans at an interest rate of around 8% per annum.

3. Is 10.20% interest rate possible for personal loans?

A rate of 10.20% is completely possible to get in India. Loan providers like Bank of Baroda offer a similar interest rate. Be sure to do your research and find the providers that work for you! 

5. How much loan % is safe?

The loan percentage that is safe for you is entirely subjective. This depends on various factors, including the borrower's income, credit history, and debt-to-income ratio.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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