Personal loans have become more affordable in 2025, offering much-needed relief to borrowers. Following a cumulative 1.25% cut in the RBI’s repo rate this year, banks have reduced their lending costs, and the benefit is now visible in personal loan interest rates. Several leading banks are offering personal loans at starting rates close to 9.75%–9.99% per annum, which is significantly lower than what borrowers were paying at the beginning of the year.

Since personal loans are unsecured, banks usually consider them high-risk products and price them accordingly. However, lower funding costs, reduced operational expenses, and improved liquidity conditions have prompted many lenders to revise their rates downward.

At the start of 2025, most banks were offering personal loans at interest rates of 10.5% or higher. Over the past few months, both public and private sector banks have announced cuts, with some lenders reducing rates by up to 2%—a substantial move for unsecured loans.

This shift has made personal loans more attractive for borrowers planning expenses such as medical emergencies, weddings, education, or debt consolidation.

Here’s how personal loan rates have moved at major banks:

• HDFC Bank: Reduced from around 10.85% to about 9.99%




• Axis Bank: Cut rates from roughly 10.55% to 9.99%




• State Bank of India (SBI): Sharp reduction from nearly 12.60% to around 10.05%




• ICICI Bank: Rates eased from 10.85% to about 10.45%




• Punjab National Bank (PNB): Brought rates down from 12.50% to around 10.60%




• Kotak Mahindra Bank: Rates largely unchanged, starting near 10.99%

This comparison clearly shows that personal loans are now more competitive, with sub-10% starting rates becoming increasingly common.

As of now, many banks are offering attractive personal loan rates, though the final rate depends on the borrower’s credit profile, income stability, and employer category.

• Bank of Maharashtra: Starting at 9.00%




• HDFC Bank: 9.99% to 24.00%




• Axis Bank: 9.99% to 22.00%




• IDFC First Bank: Starting at 9.99%




• SBI: 10.05% to 15.05%




• Bank of Baroda: Starting at 10.40%




• ICICI Bank: 10.45% to 16.50%




• IndusInd Bank: Starting at 10.49%




• PNB: Floating from 10.60%, fixed from 11.60%




• Kotak Mahindra Bank: Starting at 10.99%

Processing fees typically range from 0.35% to 5% of the loan amount, depending on the bank and customer category.

Banks evaluate several factors before offering a personal loan rate:

• Credit score and repayment history




• Existing debt obligations




• Income level and job stability




• Employer profile (government, PSU, MNC, or private firm)




• Loan amount and tenure

Since personal loans carry no collateral, banks use risk-based pricing to protect themselves from potential defaults.

Unlike home or auto loans, personal loans are generally not linked to repo rate-based benchmarks (RLLR) or MCLR. The RBI has exempted unsecured loans like personal loans and credit cards from mandatory external benchmarking due to their higher risk nature and shorter tenure, usually between 1 and 5 years.

Even though floating-rate personal loans exist, fixed-rate loans dominate the market. Borrowers prefer them because EMIs remain predictable throughout the loan tenure. Given the already higher interest rates on personal loans, customers prefer certainty over the risk of future rate hikes.

Banks, too, favor fixed rates to safeguard their margins in an uncertain interest rate environment.

Thanks to RBI’s rate cuts, 2025 has turned into a favorable year for personal loan borrowers. With several banks offering rates near 9.9%, individuals with strong credit profiles can secure loans at significantly lower costs than last year. However, borrowers should still compare interest rates, processing fees, and loan terms carefully before making a decision.