Personal Loan Interest Rates in India: Bank vs NBFC – Which One Should You Choose?

Henry MillerHenry Miller
2 min read

When you're looking for a personal loan, one of the biggest deciding factors should be the interest rate. Whether you're applying with a bank or a non-banking financial company (NBFC), the personal loan interest rates directly affects your EMI, total repayment, and overall affordability.

But which option is better — banks or NBFCs?

Let’s break it down.

Banks vs NBFCs: What’s the Difference?

  • Banks are regulated by the RBI and offer loans mainly to individuals with a good credit score and strong financial background.

  • NBFCs (Non-Banking Financial Companies) are more flexible, often approving loans for applicants with lower CIBIL scores or informal income sources.

Both offer personal loans — but their interest rates and policies vary significantly.

Comparing Personal Loan Interest Rates: Banks vs NBFCs

Lender TypeInterest Rate Range (Approx.)Best For
Public Banks9% – 13% p.a.Salaried, low-risk borrowers
Private Banks10% – 16% p.a.Salaried or self-employed with good CIBIL
NBFCs12% – 26% p.a.Low CIBIL scores, flexible income

Rates are indicative and vary based on your profile and lender terms.

What Affects Your Personal Loan Interest Rate?

  • Credit Score: Higher score = lower rate

  • Income Type & Stability: Salaried applicants usually get better rates

  • Existing Loans: Too many EMIs = higher risk

  • Loan Amount & Tenure: Bigger or longer loans may attract higher rates

  • Relationship with the Lender: Existing customers often get better deals

When to Choose a Bank

  • You have a CIBIL score above 750

  • Your income is stable and documented

  • You want lower interest rates with longer tenure options

  • You don’t need instant approval

When to Choose an NBFC

  • Your credit score is below 700

  • You have urgent or emergency needs

  • You're okay with slightly higher interest rates

  • You want quick approval with minimal paperwork

Tips to Get the Best Personal Loan Interest Rate

  • Check your CIBIL report before applying

  • Keep your income and job documents updated

  • Use loan comparison platforms like Fundcera to find the best match

  • Avoid applying with too many lenders — it reduces your score

  • Opt for shorter tenure to reduce total interest paid

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Henry Miller
Henry Miller

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