Take a personal loan only for an emergency, but compare the rates first1 min read . Updated: 03 Jun 2020, 03:37 PM IST
- Personal loans are one of the most expensive categories of loans you can avail
- If you opt for a personal loan, expect to pay an interest rate of anywhere between 9% and 20% per annum
Personal loans are one of the most expensive categories of loans you can avail of. These are unsecured loans that can be easily availed of and banks are eager to offer them. In fact, you might have received a few calls offering instant personal loan because you have been a loyal customer to your bank. However, if you opt for a personal loan, expect to pay an interest rate of anywhere between 9% and 20% per annum. The reason is simple: an unsecured loan means that the lender will not ask for a collateral. This is only feasible for the lender if they have a sense of what your credit history is like and whether you have the capability to repay the loan. But that isn’t enough of a safety net. Hence the high interest rate.
Given that they are expensive, but easily available, personal loans seem like a good option to fund an emergency expense, if you don’t have a contingency fund in place, or if the fund was depleted for some reason. Given the income uncertainty and job loss that has happened in the wake of the covid-19 pandemic, many are seeking out solutions like personal loans. But according to banking intermediaries, banks are tightening lending norms, which could make it difficult for borrowers to get new loans.
While it’s not advisable to take a personal loan unless you have an emergency or immediate requirement for funds that can’t be serviced otherwise, if you do want to opt for one, it’s wise to analyse which bank can offer you the lowest interest rates. Indian Overseas bank offers the most affordable interest rates at 9-12.45%. But even among the top 15 banks we have listed, the highest interest rates goes up to 11.25-23% offered by IndusInd Bank. Take a look at the list of personal loans available at the best rates before you make your decision.