What a personal loan costs
₹5 lakh at 12.5% for 4 years costs ₹13,290 a month and ₹1,37,920 in interest. At 18%, a common rate for lower credit scores, the EMI is ₹14,687 and interest is ₹2,05,000.
Look at the full cost, not just the rate
- Processing fee: 1–3% of the loan, plus 18% GST on the fee, deducted from what you receive.
- Insurance: lenders often add a credit insurance premium. It is optional; you can decline it.
- Prepayment charges: many personal loans are fixed-rate and charge 2–5% to close early.
Cheaper alternatives
A loan against your FD typically costs 1–2% above the FD rate, and a gold loan or top-up on an existing home loan is usually far cheaper than an unsecured personal loan.
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Questions people ask
What credit score do I need for a good rate?
Lenders usually offer their best personal loan rates to CIBIL scores of 750 and above. Below 700, expect higher rates or a rejection.
Why does most of my early EMI go to interest?
Interest is charged on the balance you still owe. In the first years the balance is highest, so interest takes the bigger share. As the balance falls, more of each EMI repays principal. The year-by-year table shows this shift.