Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
Types of Personal Loans in India Explained with Bank
Personal loans in India come in various forms, each suited for different financial needs. These loans can be categorized based on security, purpose, and eligibility. Here’s a detailed breakdown of the most common types of personal loans, current interest rates, key factors affecting loan terms, and smart tips for borrowers.
Current Interest Rates from Leading Banks (April 2025)
Unsecured Personal Loans
These loans do not require any collateral, making them ideal for salaried professionals and individuals with stable incomes. Approval depends on your credit score, monthly income, and repayment capacity. Since there’s no security involved, interest rates are usually higher.
Secured Personal Loans
In secured loans, borrowers pledge assets such as gold, property, or fixed deposits as collateral. These loans come with lower interest rates due to reduced lender risk. However, if the borrower defaults, the asset may be seized.
Salary Account-Based Loans
These are personal loans tied to your salary account. Banks offer these to salaried individuals with a good repayment history. Benefits include quick processing, lower interest rates, and higher loan eligibility due to consistent salary inflow.
Purpose-Specific Loans
Some personal loans are tailored for specific expenses such as weddings, education, home renovation, or medical emergencies. These may come with flexible repayment options and minimal paperwork.
Overdraft Against Fixed Deposit (FD)
This is a secured loan where you can borrow against your fixed deposit. Interest is charged only on the amount used, and the loan amount depends on your FD’s value. Ideal for short-term needs with lower interest.
Line of Credit Personal Loan
A line of credit provides access to a pre-approved limit you can use as needed. Interest applies only on withdrawn amounts, making it flexible for unpredictable expenses. Ideal for freelancers, business owners, or those with irregular cash flow.
Current Interest Rates from Leading Banks (April 2025)
- HDFC Bank: Interest rates from 10.85% p.a. | Loan up to ₹40 lakh | Tenure up to 6 years | Processing fee: ₹6,500
- ICICI Bank: Interest rates from 10.85% p.a. | Loan up to ₹50 lakh | Tenure up to 6 years | Processing fee: 2% of loan amount
- Bank of India: Interest rates from 10.85% p.a. | Loans up to 36x gross monthly salary | Tenure up to 84 months | Special offers for doctors, government employees, and PSU staff
- State Bank of India (SBI): Interest rates from 11.25% p.a. | Processing fee: 0% to 1.5% depending on profile
Key Factors Affecting Personal Loan Interest Rates
- Credit Score: A higher credit score (750+) leads to lower interest rates.
- Loan Amount & Tenure: Larger loans and longer durations may attract higher rates.
- Employment Status: Salaried individuals with stable income get better terms than self-employed.
- Banking Relationship: Long-standing customers may receive preferential interest rates.
Recent Trends in India’s Loan Market
- Rising Defaults: Defaults are increasing among retail borrowers, especially in personal and micro loans.
- RBI’s Regulatory Actions: The Reserve Bank of India has introduced stricter lending norms to manage retail loan growth.
- Relaxed Capital Rules (Feb 2025): RBI eased rules for microloans, boosting lending in that segment.
Smart Tips for Borrowers
- Know Your Requirement: Borrow only what you need and ensure it aligns with your repayment ability.
- Compare Offers: Look at interest rates, processing fees, tenure, and prepayment charges before choosing a lender.
- Check Eligibility: Use online tools to check your eligibility to avoid application rejection.
- Read the Fine Print: Understand repayment terms, foreclosure charges, and late payment penalties.
Conclusion
Personal loans can be a convenient way to meet your financial goals. But it’s essential to understand the different types available, the current market rates, and factors that influence loan approval. Platforms like MoneyBuddha.in help you compare offers, apply online, and access the best financial products tailored to your needs. Stay informed, borrow wisely, and make smarter financial decisions in 2025 and beyond.