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What decides the interest rate on my personal loan?
Updated · CardKhoj Editorial Team
Short answer
Your personal loan interest rate depends mainly on your credit score, monthly income, employer category, existing debts and relationship with the bank. A salaried borrower with a 780 score at a large company may get around 10–11%, while a borrower with a 680 score could be offered 16–24% for the same amount.
The main factors
- Credit score and history — the single biggest factor.
- Income — higher, stable income means lower risk.
- Employer — banks classify companies into categories; government and large listed employers get the best pricing.
- Debt-to-income (FOIR) — the share of income already going to EMIs.
- Existing relationship — salary-account holders often receive pre-approved, lower-rate offers.
- Loan amount and tenure — very small or very long loans may carry higher rates.
How to get a lower rate
- Check your credit report and fix errors before applying.
- Start with your own bank's pre-approved offer, then compare 2–3 others.
- Negotiate — mention competing offers and ask for a processing-fee waiver.
- Compare the APR on the Key Fact Statement, not just the headline rate.
This answer is general information, not personalised financial or tax advice. Rules, rates and limits change — confirm with your bank, the RBI or a qualified adviser before making decisions.