Which Bank is Best for Personal Loan with Low Interest 2025

Personal loan interest rates in India start with single digits and often go to double digits, reaching 20% and above. The interest rate plays a crucial role in the borrowing decisions in India. The higher the interest rate charged, the greater the total payable amount becomes. Naturally, a low interest rate is what most borrowers look for. The rates vary based on multiple factors, from borrowers’ financial profiles to lenders’ policies. Reuters has recently estimated a decline of 10 basis points in Indian banks' net interest margins for the 2025-26 fiscal year. It may indicate the scope of lower personal loan rates for borrowers, but it can also lead to more rigid norms for bank loan approvals.

Let’s break down and compare the varying interest rates to find the best bank for personal loans. We shall also explore more significant factors that influence the interest rates and are must-considered when borrowing.

Best Bank for Personal Loans: Comparing Interest Rates

The key to finding the best bank for low-interest personal loan is to compare the rates offered by the banks. As of March 3, 2025, the interest rates offered by top banks in India stand at:

Bank of Maharashtra seems to be leading the race for the best bank for low-interest personal loan, with rates starting at 10%. Note that its rates can go up to 12.80%, whereas HSBC, IDBI, Bank of India, HDFC, ICICI, and many more banks offer lower starting points. Ultimately, the quoted rate will depend on the individual loan applicant’s financial stand and the lender’s policy.

Essential Considerations When Selecting the Best Personal Loan with low Interest Rates

Interest rate is a deciding parameter but should not be the only one as certain charges may be applicable to the loan, impacting the total payable amount. The following are factors that require sufficient consideration before finalising the best bank for personal loans:

Processing Fee

It refers to the one-time fee banks charge while processing the loan. Even if it is a tiny percentage, it can add to your financial responsibility. For instance, if you take a personal loan of INR 10 lakh from the Bank of India, a processing fee of 2%. That will add INR 20,000 to your repayment plan. Make sure to tally the processing fee applicability to ascertain your financial responsibility correctly and not be surprised by any unknown charges down the lane.

The table below displays the processing fees charged by the banks as of March 3, 2025:

Pre-Closure Charges

Banks can charge a certain percentage of the loan amount if the borrower decides to make partial payments or a complete pre-payment of the outstanding repayable amount before the tenure ends. For some banks, the amount is fixed regardless of the pre-closure timing, while others charge varying fees depending on the remaining tenure. Low or no pre-closure is a significant feature to look for in the best bank for personal loans to keep your loan as cost-effective as possible.

Loan Disbursal Time

A quick disbursal time is crucial during financial emergencies. Getting access to the best bank for low-interest personal loan will not be that helpful if it doesn’t generate the amount when you need it. Fortunately, most banks have adapted to digital banking and sped up their processing times. All said, do enquire about the probable loan disbursal schedule to pick the right financing. 

Tenure

Flexible tenures are considered a perk, but there is more to the theory. The longer the tenure, the more interest you may end up paying. While a shorter tenure may indicate higher EMIS, the overall interest will be much lower compared to a longer tenure. Finding a suitable tenure is critical to avoid spending a hefty amount as interest but also to keep the EMIs within your budget.

Discounts & Special Offers

Banks can offer special deals and discounts to loyal customers, existing account holders with a long history, salary account holders, and so on. Check out if you are eligible for any offers or discounts from any bank, as it can help you save on interest and other charges. 

Decoding Factors Influencing Personal Loan Interest Rates

Availing of the lowest interest rates on a personal loan depends on multiple parameters like:

Income

Loan applicants with steady and high incomes have lower chances of defaulting on loan payments. Their financial stability earns them a certain trust level, and lenders feel more comfortable approving the loan. The income also dictates the highest loan amount one is eligible to receive. 

Employment Details

Banks in India tend to offer differing interest rates to salaried and self-employed individuals. Salaried individuals have a stable income source that a self-employed applicant may not have, making the former a more predictable borrower. Job security further has a say. For instance, individuals with government jobs have excellent chances of availing a fast approval personal loan.

Age

Considering the uncertainty of income individuals nearing the age of retirement can have, banks tend to impose stricter eligibility criteria and terms. This step is to prevent defaults and loss of money. Young applicants with a new job and limited credit history are also considered high-risk borrowers as banks have restricted means of screening. When the risk of lending is high, charging a higher rate of interest is a common practice for obvious reasons of safeguarding the principal amount. 

CIBIL Score

Responsible borrowing and timely repayment of debt are factored in when deciding the CIBIL scores. A high score is an indicator of trustworthiness, and a low score reduces the chance of approval. If approved, applicants with low scores are usually charged high interest rates and firm terms. Ideally, the best bank for personal loans with low CIBIL score, for those cornered, is the one also offering low interest rates.

Key Strategies to Avail the Lowest Interest Rate on a Personal Loan

Each bank offers a certain interest rate range to their customers; however, the applicants can improve their chances of obtaining a more suitable interest rate. Here are some strategies to get the lowest interest rates from the best bank for personal loans:

• Improve the CIBIL Score: Finding the best bank for personal loans with low CIBIL score sounds like a great idea, but a high score offers more chances of approval and far better terms. Making timely payments on existing debt is the best way to boost the score.
• Pay off Existing Debt: Existing debt is a financial burden that a bank will consider during the loan application evaluation. If the debt seems too demanding against the income, availing a new credit line might become difficult.
• Refrain from Multiple Loan Applications: A personal loan application leads to a hard inquiry by the lender, which can be reflected in your credit report for a certain period. Too many hard inquiries can impact the credit score negatively and, overall, cloud your financial image in front of potential lenders. Avoid making multiple loan applications within short durations; instead, focus on improving your approval chances of getting approval from the best bank for personal loans.

Apply with the Best Lender for Personal Loan: My Mudra

An easy, streamlined personal loan application and approval process is essential. Identifying top lenders, collecting individual interest rates and other details, and then performing a thorough comparison requires time and effort. It is not a smart approach, especially during a financial emergency. This is where My Mudra steps in with a simplified loan procedure. 

All important information and updated rates are available under a single platform. We have made the eligibility criteria completely transparent from the very beginning. Our personal loan EMI calculator will further help you compute the different EMI options with varying interest rates and tenure, selecting the best lender for personal loan. 

Click on the Apply Now button or request the available offers for a more detailed comparison and obtain the financial assistance you require in a completely hassle-free manner.