Best Bank For Personal Loan in India 2024

Best Personal Loan Bank in India

Hello friends, in this article, we’ll discuss which is the best bank for a personal loan. Nowadays, we can get a personal loan from different places, but the bank is the best place to apply for a personal loan. The 2nd option is that there are several apps for instant personal loans. 

Best Bank For Personal Loan in India (1)

Best Bank For Personal Loan in India (1)

Now, there are 2 types of these apps, some of them are generally known as ‘Chinese’ loan apps, which are the ones that are not RBI registered, and there are some instant personal loan apps that are available in the Google Play Store and they are RBI-registered apps. Stay away from those that are not RBI registered apps, because they’re all 100% scams. 

You must stay away from such dangerous apps. I’m going to tell you about a true case for instance, and it happened where I’m from. So, a guy applied for a loan and he got only 1800 rupees. After 3-4 days of getting this 1800 rupee loan, he started getting calls from recovery agents and they demanded instant repayment of 3000 rupees.

 Now, whenever we apply for a personal loan in these loan apps, they ask for gallery access, and we just click on ‘Ok’, we do the same when they ask for contact access as well. So, the app can now access all the photos in your gallery and the contacts. 

So, what happened is that they took a photo from the guy’s phone and edited and pasted his face into a nude photo with a nude girl. So, they made an inappropriate fake photo. Then, they sent him the photo, demanded 3000 rupees, and blackmailed him by threatening to send that fake photo to his contacts.

 The guy became utterly depressed; he feared that his relatives would see that picture, and they wouldn’t know that this picture had been edited, and that’d be extremely humiliating. Anyone can go into depression in such a situation. So, he came to me because he knew that being a YouTuber I had banking knowledge, and he explained his situation. 

I told him that he got scammed. He asked whether he should send them the 3000, to stop them from sharing the photo. I explained that they were not playing this just to make a 1200 rupee profit; they’d ask for more if he paid the 3000 rupees, and they wouldn’t stop doing it. They’d keep worsening his situation and keep blackmailing him. 

The simple solution was to let them do whatever they wanted and stop all contact with them. Keeping contact would enable them to keep blackmailing. So, they’d send the photo to one or two contacts, and then they’ll calm down.

 he simply needed to turn his SIM off for a month or two. Zero contact means zero blackmail. That’s the simple solution and the best way to prevent such an incident according to me is to stay away from any instant personal loan apps. 

A bank is undoubtedly the best option. Whenever we take a loan from a bank, we may go to a branch for that, or from online or use their official apps, or use net banking, and they’ll never ask for access to your gallery or the contacts list.

 Naturally, if I’m the one taking a loan, they should ask for my information, not my contacts list. Bank will never ask for your contacts or gallery access. Suppose, I’ve taken a loan of 1 lakh rupees from a bank and if by chance, I become so helpless that I can’t pay them back, the bank will come to me to recover the money.

 Recovery is the bank’s right, as they’ve lent me the money, and if I can’t pay back, then they’ll come to me, not go to my relatives for recovery. They’ll maintain a certain dignity doing so. They’ll surely come to your home and pressurise you; I’m not denying that. But they will not call your relatives and humiliate you publicly. You’ve taken the loan and if you default, they’ll deal with only you. 

They’ll not send an edited inappropriate photo to your relatives. Bank will not humiliate you publicly. That’s why, in my opinion, bank is better. So, cross the fake ‘Chinese’ loan apps out. Even if I talk about the RBI registered loan apps, then… suppose I need a loan from a bank, but often, the loan is not processed instantly. 

Nowadays banks also grant loans quickly. and just to make this article, I applied for a 25,000 rupee loan from AU Bank and within 5 minutes, they credited the loan to my account. So, it’s not that if you want a loan within 5 minutes, then you have to apply on instant loan apps, if you have a pre-approved offer from a bank, then they’ll also give you a loan in 5 minutes. 

It’s not that you’d need a lot of paperwork and it’s true that if you apply from a branch it’ll take a week at least. But if you have a pre-approved offer from the bank, then you can get a loan instantly. It’s popularly known that instant loan apps grant you a loan in an hour. 

That’s fine, but these are not reliable too. In these too, when you apply for a loan, you have to share the contact list and their method of recovery is also objectionable. Since these are RBI registered, your money will be safe and you won’t get scammed. 

You’re getting the loan and you must repay it; your CIBIL score will improve too. If you’re certain that you can repay, then these apps are okay. But their method of recovery is wrongful as well. If someone defaults, then they too, will ring up the relatives to say that this guy has defaulted. Why call the relatives, when they should talk to the person who took the loan? 

The Chinese loan apps are a total scam; they’ll just blackmail you. Although instant loan apps are recovering their own money, their methods are questionable. So, this was the difference between banks and instant loan apps. 

Rest is your choice; I’ve just held up the whole picture before you. Let’s understand the personal loans. Let me explain this on a blank page. Let’s look at a thing first. I’m taking an example of the bank. Suppose I’ve applied for a home loan from a bank. 

I’ll get the loan for 8-9% interest rate, and if my CIBIL score is poor, even then the interest rate would be 10% maximum. If I have a good CIBIL score, then the bank may grant me a loan with an 8% interest rate. 

On the other hand, if I apply for a personal loan from a bank, If my CIBIL score is perfect, like Ambani’s, the interest rate would be a minimum of 10% otherwise, the rate can be 11%, 12%, 15% and it can go up to even 25-30%. So, this was the rate of interest on a personal loan from banks. 

Now, you might wonder, a home loan is also a loan, then why the banks are charging an 8% interest rate for it, but the interest rate for the personal loan is as high as 15%, 16%, or 20%? The simple reason is that there are 2 types of loans secured loans and unsecured loans. 

A secured loan means that the bank has something mortgaged, such as a home loan, car loan, or gold loan; so, if you don’t repay your home loan, the bank will seize the house. The bank owns the papers of your house, that’s called ‘mortgage’ in banking language. 

So, your property is mortgaged to the bank. So, if you default, then the bank will seize the house and auction it to recover. In the case of a car loan, if you observe the car’s RC, you’ll see written in small fonts – suppose you’ve taken a car loan from ICICI Bank – then it’ll be written there in small fonts – “Hypothecated to ICICI Bank”. It means that a hypothecation charge has been applied to the car. It’s called hypothecation in banking term, meaning that if you default on the car loan, bank will seize the car and auction it to recover. So, this is a secured loan too. Similarly, if you don’t pay the interest of a gold loan, the gold that’s mortgaged to the bank will be sold by them for recovery. 

So, bank has a safety net. If you don’t repay, bank will sell your assets. But there are unsecured loans, which are credit cards, personal loans, etc. When we apply for a personal loan, we don’t mortgage anything. The bank considers our CIBIL score and salary to grant us a loan. 

If someone defaults in this case, the bank can only go to court. But there’s no mortgage. They can worsen the CIBIL score, or take the issue to court, but that won’t recover the bank’s money, even if the defaulter gets punished. That’s why banks put high-interest rates, assuming that at least 10% of people would default on the loan. 

So, they try to recover the defaulted money from the remaining 90%. That’s why the interest rate of personal loan is so high. Next, there’re fixed rate of interest and floating rate of interest. It applies to personal loan as well. Let’s go through it quickly. 

Suppose nowadays, the interest rate is 15%, this is fixed rate of interest. Now you have a choice. Bank will agree to give you loan for 5 years, but you’ll be asked whether you want it in floating or fixed rate of interest. If you choose fixed rate, the current 15% rate will be fixed for you. 

Any change in repo rate won’t affect it, your EMI for the next 5 years will be of same amount, according to 15% interest. But if you choose floating rate, and if today’s rate is 15%, then according to the RBI’s monitory policy that changes every 2 months, the repo rate will decrease or increase; then, if the repo rate increases, your interest may reach 16%, and if it decreases, the interest rate may become 13%. 

So, it’s not fixed, but floating. So, your interest rate will depend on RBI’s repo rate. You can choose either fixed, or floating rate. Some banks only provide loan only on fixed rate, such as ICICI Bank. They totally avoid the hassle of floating rate of interest. 

But some banks provide loan on both floating and fixed rate. So, you should know all the terms and details if you’re applying for personal loan. Let’s move forward, let me quickly show you the personal loan calculator, so, you can see the number of instalments you’ve to pay. 

So, I’m taking an example here; you can see the personal loan calculator; suppose your loan amount is 1 lakh rupees. I’m selecting the time as 60 months, that’s 5 years, and I put the rate of interest as 15%. 

So, here, my instalment for each month for the next 5 years will be 2379 rupees, and my total payable interest on 1 lakh rupees will be 42740 rupees. So, in the next 5 years, I’ll have to pay total 142740 rupees. Now, if I increase the tenure from 5 years to 7 years, then my instalment amount will decrease to 1930 rupees, but my total payable interest will increase.

 Then I’d have to pay over 62000 for 1 lakh rupees as interest. So, we’ve seen all these, and now, let’s move on to next. Let me tell you something first. I’ll compare all the banks to find the best one, I’ll show you the comparison and see which one is giving the lowest rate of interest nowadays.

 But first, let’s see the interest rates of some personal loan apps that are RBI registered, and you’ll see why I’m not recommending them. If I talk about their rate of interest – I’ve put them in a list here – as you can see, the rate of interest can reach 45%! 

They say that the interest rate starts from 9.9%, but it can reach up to 45%. Here, it is 37%, this one says 11.99% onwards – there’re 30%, 32%, and here it reaches 66%! So, there’s no upper limit to it. 

The interest rates of these personal loan apps are just huge! Now, let’s look at the processing fees. The processing fee at banks is usually 1 or 2%. It means, that if your loan amount is 1 lakh rupees, then bank will give you 98000 rupees, not 1 lakh as the loan amount states, as they’ll deduct 2% as the file charges. 

But if I look at the processing fees of personal loan apps, then only Navi’s processing fee is zero, but the rest goes like this 15%, 8%, 2.5%, 3%, 3.5%, 3.93%, 4%, 6.5% so, even their processing fee is so high. If your loan amount is 1 lakh, and the processing fee is 15%, then I’ll only get 85000 as loan.

 So, for 1 lakh rupee loan, they’re giving only 85000. Now, their interest rate is 30%. So, the interest will amount to about 35000. So, I’m getting 85000 as loan, but I’ll have to repay 135000 rupees. It’s not helpful at all. I don’t know why people prefer these despite the high charges.

 Another thing, banks usually grant loan up to 50 lakhs, like ICICI does, but only a handful of instant personal loan apps, who grants a generous amount. Bajaj Finserv gives up to 40 lakhs, for Navi, it’s 20 lakhs, but there are some who give maximum of 45000 only. I don’t know how the maximum loan amount of 45K or 1 lakh rupees going to be helpful. 

So, always take loan from banks, there’ll be no hassle. Rest is your choice. Now, the tenure of personal loan should be 5 to 7 years at least, so that you can repay peacefully. Again, only a few apps give that kind of tenure. 

Bajaj among them is reputed company… so, the tenures are 8 years, 6 years, 5 years etc. But here, the tenure is of 3 to 48 months. Now, Bajaj gives the tenure of 6 to 8 years, but it’s not certain that you’ll get loan for 8 years. If your CIBIL score is good, only then you may get it for 8 years. Otherwise, the tenure can be 10 months too, depending on your CIBIL score. 

Some of them provide loans with a maximum duration of four months. So, what’s the point of this short tenure while the interest rate is so high? Now, let’s see how the banks are different. I’m taking ICICI Bank for example, but I’ve collected interest rates of other banks as well. 

Here, the interest rate begins from 10.50% and it goes up to 16%. So, you’ll get the lowest rate if your CIBIL score is all right, but if your CIBIL score is poor, then it won’t be as high as 30-32%, rather it will be 16% at most, not more than that.

 So, this is an acceptable interest rate for a personal loan. The processing fee is 2.5%, but you can easily negotiate this fee with the bank, as they have a target to fulfill. So, this is negotiable. And the tenure is of 84 months, So, you’ll get the loan for 7 years maximum. 

Similarly, the interest rate of SBI’s personal loan starts from 11.05%. It is a decent rate; the rate is not too much. In HDFC Bank, the interest of a personal loan starts from 10.5%, but it goes up to 25%. So, ICICI Bank is better, as their maximum rate of interest is 16%. The processing fee is fixed at 5000 rupees, no matter how much is the loan amount. 

Now, for Axis Bank personal loan, the maximum loan amount is 40 lakhs. The tenure is a maximum 5 years; the rate of interest is decent too; it starts from 10.49%. Let’s look at Kotak Mahindra Bank’s personal loan. 

The interest rate is okay here too, it begins from 10.99%. The processing fee is a bit high – It’s 3%. Let’s look at Bank of Baroda too. The interest rate of personal loan starts from 10.10%. The tenure is 84 months or 7 years maximum as well. So, if we talk about the best loan, then among the banks we’ve gone through, only 2 banks are providing the best interest rate – ICICI Bank and Axis Bank. 

ICICI Bank’s interest begin from 10.50%, and goes up to 16%, in Axis Bank, the interest for personal loan starts from 10.49%. So, I’ll recommend you to compare all the banks, even note down everything in a diary. 

So, you can take personal loan from any of these banks, just note down all of their interest rates. You can even apply online for these two. I’ll put the links in the description box, so that you can apply from home as well. 

But if you want to go to a branch, then take a diary and note down each of the bank’s interest rates. So, this was all. I’ve told you each point related to the personal loan in detail. I missed an example here, let me tell you quickly. 

So, I took a personal loan from AU Bank. It was a 25,000 rupee loan. They deducted 2.76% as a processing fee. So, the loan was of 25000, but the amount that was credited after the 2.76% deduction was 24310 rupees. So, the loan that was granted was of 25000 rupees, but 24310 rupees was credited to me, because a 2.76% processing fee was charged. 

The EMI for 1 year was 2328 rupees per month. So, 2,328 rupees each month for a year amounts to 27,936 rupees. Now, this is what was credited and this is what I have to pay, so, I have to pay 3636 rupees extra as interest. 

Now this was only 25000, but if it was 25 lakhs, then you could see the difference and see what a hefty amount would the 2.76% processing fee become. But, there are opportunities to negotiate. You can easily negotiate the processing fee and negotiate the rate of interest, to lessen your interest rate as much as possible. 

There’s a tough competition among the banks; they need to sell as much as you need to avail the loan. So, do negotiate; don’t worry, the negotiations go smoothly. So, I’ve covered everything related to personal loan. I hope you found this article informative. For now, this is the end of the article. Thanks for listening and thank you all.

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