Different Types of Loans in India & Interest Rate

Today, securing a loan has become an integral part of achieving various personal and professional milestones. There might be needs that you couldn’t afford in the moment with your salary or savings alone, such as purchasing a dream home, funding a child’s education, expanding a business, or managing unforeseen expenses. Bank loans provide the necessary financial leverage to cover them at competitive rates.

This guide offers an in-depth exploration of the various types of bank loans available in India, their corresponding interest rates, and the top lending institutions. Understanding the nuances of each loan type is crucial for making informed financial decisions that align with your long-term goals. Read on to learn more about the various types of loans provided in India and your best options to secure them.

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Types of Loans

Banks and non-banking financial companies (NBFCs) in India offer a diverse portfolio of loan products to meet a wide range of your needs.

These loans can be broadly categorised as secured loan and unsecured loan. Secured loans require collateral, such as property or gold, which reduces the risk for lenders and typically results in lower interest rates. Unsecured loans, on the other hand, do not require any collateral and are approved based on the borrower’s creditworthiness and income, often carrying higher interest rates due to the increased risk for the lender.

Here are the top 10 types of bank loans available in India:

Personal Loans: These are unsecured loans that can be used for various purposes, from medical emergencies to travel expenses.
Home Loans: Secured loans taken for purchasing a residential property.
Gold Loans: Secured loans where gold jewellery or coins are pledged as collateral.
Vehicle Loans: These are secured loans for purchasing a new or used vehicle, with the vehicle itself serving as collateral.
Loan Against Property (LAP): A secured loan where a residential or commercial property is mortgaged to avail funds.
Education Loans: These loans are designed to finance higher education expenses for students.
Business Loans: These loans cater to the financial needs of businesses, including working capital, expansion, and equipment purchase.
Credit Cards: A form of revolving credit that allows users to borrow funds up to a certain limit.
Loan Against Fixed Deposits: A secured loan where the borrower’s fixed deposit is used as collateral.
Loan Against Securities: A loan taken against financial securities like shares, mutual funds, and bonds.

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Personal Loans

These are unsecured credit instruments, meaning they do not require collateral, but this convenience comes at a cost. Lenders rely heavily on your CIBIL score and ‘Debt-to-Income Ratio’ to determine eligibility.

A common trap for borrowers is the ‘Flat Rate’ vs. ‘Reducing Balance’ interest calculation; a flat rate of 10% is actually more expensive than a reducing rate of 16%. Always ask for the annualised percentage rate (APR) to compare offers accurately.

Here is the overview of personal loans in India:

Feature	Typical Market Range (2025)
Interest Rate	10.50% p.a. – 24.00% p.a.
Loan Tenure	12 Months – 60 Months
Processing Fee	0.5% – 2.5% of Loan Amount
Pre-closure Charges	Nil – 4% (Often locked for 6-12 months)
Eligibility	Credit Score > 750 preferred

Home Loans

Home loans are long-term commitments where the interest regime (Fixed vs. Floating) dictates your financial health. Most current loans are linked to the Repo Linked Loan Rate (RLLR), ensuring transparency, but this also means your EMI fluctuates immediately with RBI policy changes.

A critical, often overlooked factor is the ‘LTV Ratio’ (Loan-to-Value); banks typically fund only 75-90% of the property cost, leaving you to arrange the down payment plus registration charges and stamp duty independently.

Here is the overview of home loans in India:

Feature	Typical Market Range (2025)
Interest Rate	8.35% p.a. – 10.50% p.a.
Loan Tenure	Up to 30 Years
LTV Ratio	75% (Loans > ₹75L) to 90% (Loans < ₹30L)
Tax Benefits	Sec 80C (Principal) & Sec 24b (Interest)
Processing Fee	₹2,000 – 0.50% of Loan Amount

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Gold Loans

This is the fastest way to monetise idle assets without income proof or a high credit score. The loan value is determined by the ‘LTV Cap’ set by the RBI (typically 75% of the gold’s market value), not the making charges or stone weight.

A unique advantage here is the ‘Bullet Repayment’ option, allowing you to pay the entire principal and interest at the end of the tenure, unlike the monthly EMIs of standard loans.

Here is the overview of gold loans in India:

Feature	Typical Market Range (2025)
Interest Rate	8.80% p.a. – 18.00% p.a.
Loan Tenure	3 Months – 36 Months
LTV Ratio	Up to 75% of Gold Value
Repayment Mode	EMI or Bullet Repayment
Processing Time	30 Minutes – 4 Hours

Vehicle Loans

While dealer financing is convenient, it is often marked up with hidden commissions; direct bank financing usually offers better rates. A critical nuance is the distinction between ‘Ex-Showroom’ and ‘On-Road’ funding; most banks fund 85-90% of the on-road price, which includes insurance and registration.

Ensure you check the ‘Hypothecation Removal’ process upfront, as this is mandatory to sell the car later.

Here is the overview of vehicle loans in India:

Feature	Typical Market Range (2025)
Interest Rate (New)	8.75% p.a. – 12.00% p.a.
Interest Rate (Used)	11.00% p.a. – 18.00% p.a.
Loan Tenure	3 Years – 7 Years
LTV Ratio	85% – 100% of On-Road Price
Foreclosure Charges	2% – 5% of Outstanding Principal

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Loan Against Property (LAP)

LAP allows you to unlock the value of a ‘dead asset’ like a self-occupied house or a vacant commercial plot. These loans are significantly cheaper than personal loans because they are secured, but the processing time is longer due to legal verification and property valuation.

Be aware that the LTV is conservative here; banks rarely lend more than 60-70% of the property’s market value to mitigate real estate volatility risks.

Here is the overview of LAP in India:

Feature	Typical Market Range (2025)
Interest Rate	9.50% p.a. – 12.50% p.a.
Loan Tenure	Up to 15 Years
LTV Ratio	50% – 70% of Property Value
Property Type	Residential, Commercial, or Industrial
Processing Fee	0.50% – 1.00% of Loan Amount

Education Loans

Designed to fund higher studies, these loans cover tuition, accommodation, and even travel expenses. The defining feature is the ‘Moratorium Period’ (course duration + 6 to 12 months), during which you don’t have to pay the principal.

For loans under ₹4 Lakhs, no collateral or third-party guarantee is required, making it accessible for merit students.

Here is the overview of education loans in India:

Feature	Typical Market Range (2025)
Interest Rate	8.50% p.a. – 14.00% p.a.
Loan Tenure	Up to 15 Years (Post Moratorium)
Collateral Limit	Required for loans > ₹7.5 Lakhs
Tax Benefit	Full Interest deduction under Sec 80E
Margin Money	Nil (Up to ₹4L) to 15% (Study Abroad)

Business Loans

These facilities cater to working capital needs or expansion and are categorized into ‘Term Loans’ or ‘Overdrafts’. Lenders scrutinize your GST returns and vintage (years in business) more than just the profit margins.

A vital insight is that ‘Unsecured Business Loans’ carry a high risk premium; opting for a CGTMSE-backed loan (government guarantee scheme) can significantly lower your collateral burden.

Here is the overview of business loans in India:

Feature	Typical Market Range (2025)
Interest Rate	11.00% p.a. – 22.00% p.a.
Loan Tenure	12 Months – 60 Months
Eligibility	Min. 2-3 Years Business Vintage
Loan Type	Term Loan, Overdraft, Cash Credit
Documentation	ITR, GST Returns, Bank Statements

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Credit Cards

Credit cards are essentially interest-free short-term loans, provided you pay the ‘Total Amount Due’ by the deadline. The most dangerous trap is the ‘Minimum Amount Due’; paying only this attracts finance charges of 36-48% p.a. on the entire outstanding balance from the date of purchase.

Utilisation ratio is key here; consistently using >30% of your limit can negatively impact your credit score.

Here is the overview of credit cards in India:

Feature	Typical Market Range (2025)
Interest Free Period	45 – 50 Days
Finance Charges (APR)	36% p.a. – 48% p.a.
Cash Advance Fee	2.5% – 3.0% of Withdrawal Amount
Late Payment Fee	₹100 – ₹1,300 (Based on Slab)
Forex Markup	1.99% – 3.50% (International Usage)

Loan Against Fixed Deposits

This is the most cost-effective way to handle a liquidity crunch without breaking your investment and losing interest earnings. The bank marks a lien on your FD and gives you an overdraft limit, typically charging just 1% to 2% above your FD interest rate.

Since the bank already holds your money, there is zero processing fee and no credit check required.

Here is the overview of loans against fixed deposits in India:

Feature	Typical Market Range (2025)
Interest Rate	FD Rate + 1.00% to 2.00%
LTV Ratio	85% – 95% of FD Value
Processing Fee	Usually Nil
Eligibility	Any FD holder (Single/Joint)
Repayment	Flexible (Interest only on utilised amount)

Loan Against Securities (LAS)

LAS allows you to pledge financial assets like shares, mutual funds, or insurance policies to get an overdraft limit. The critical factor here is the ‘Haircut’ (margin); banks might lend only 50% of the value of equity shares due to volatility, whereas debt mutual funds can fetch up to 80%.

This facility is ideal for traders who need liquidity but don’t want to trigger capital gains tax by selling their portfolio.

Here is the overview of loan against securities in India:

Feature	Typical Market Range (2025)
Interest Rate	9.00% p.a. – 12.00% p.a.
LTV (Equity)	50% of Market Value
LTV (Debt/Bonds)	Up to 80% of Market Value
Loan Type	Overdraft Facility
List of Securities	Approved Scrips List (Bank Specific)

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Different Types of Loans and Interest Rates

Understanding the interest rates associated with each loan type is crucial for assessing the overall cost of borrowing. The interest rates are influenced by several factors, including the type of loan, the borrower’s credit score, income, and the lender’s policies.

1. Personal Loan Interest Rates

Personal loans are a popular unsecured loan choice for immediate financial needs due to their versatility and the absence of collateral requirements. However, the interest rates for personal loans are generally higher than compared for secured loans.

Here is a list of the top personal loan interest rates in India:

Bank / NBFC	Interest Rate (per annum)
ICICI Bank	10.60%* and 16.50%*
Axis Bank	9.99%* – 22.00%*
IDFC FIRST Bank	9.99%* – 20.10%*
Punjab National Bank	10.50%* onwards
Federal Bank	11.99%* onwards
HDFC Bank	10.75%* – 22.50%*
State Bank of India	10.20%* onwards
Kotak Mahindra Bank	10.99%* onwards
Bank of Baroda	10.90%* onwards
IndusInd Bank	10.49%* onwards
Bajaj Finserv	11.00%* onwards
Tata Capital	10.99%* onwards
HDB Financial Services	Up to 36%*
SMFG India Credit	11.99%* onwards
IIFL Finance	12.75%* – 44.00%*
Buddy Loan	11.99%* onwards

*Please be aware that interest rates may change periodically, as determined by the respective lenders.

A personal loan is also one of the best and most flexible options out there, as you can use this loan for almost any need of yours. This includes personal expenses, travel or even investments. However, check the details like return and interest rates before you proceed with usages like investments.

2. Home Loan Interest Rates

Home loans are long-term secured loans with the property itself serving as collateral. They typically have lower interest rates compared to other loan types due to the secured nature of the loan.

Here is a list of the top home loan interest rates in India:

Bank / NBFC	Interest Rate (per annum)
Bank of Baroda	8.40%* onwards
Central Bank of India	8.35%* onwards
Bank of India	8.30%* onwards
Axis Bank	8.75%* – 11.90%*
Punjab National Bank	8.45%* – 10.65%*
State Bank of India	8.50%* – 10.75%*
ICICI Bank	8.75%* onwards
HDFC Bank	8.50%* onwards
Union Bank of India	8.35%* onwards
Kotak Mahindra Bank	8.70%* onwards
LIC Housing Finance	8.50%* onwards
Bajaj Housing Finance	8.50%* onwards
Tata Capital Housing	8.95%* onwards
PNB Housing Finance	8.75%* onwards
Indiabulls Housing	8.95%* onwards
Buddy Loan	11.99%* onwards

*Please be aware that interest rates may change periodically, as determined by the respective lenders.

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3. Gold Loan Interest Rates

Gold loans are a quick and convenient way to secure funds by pledging gold ornaments. The interest rates are generally lower than personal loans. This is also a type of secured loan process, as you will be pledging your gold for security.

Here is a list of the top gold loan interest rates in India:

Bank / NBFC	Interest Rate (per annum)
State Bank of India	8.85%* onwards
HDFC Bank	9.30%* – 17.86%*
ICICI Bank	10.00%* onwards
Canara Bank	9.25%* onwards
Bank of Baroda	8.80%* onwards
Axis Bank	17.00%* onwards
Federal Bank	8.99%* onwards
Kotak Mahindra Bank	9.00%* – 24.00%*
Punjab National Bank	9.25%* onwards
Union Bank of India	9.30%* onwards
Muthoot Finance	12.00%* – 26.00%*
Manappuram Finance	9.90%* – 26.00%*
IIFL Finance	9.24%* – 27.00%*
Bajaj Finserv	9.50%* – 28.00%*
Tata Capital	10.50%* onwards

*Please be aware that interest rates may change periodically, as determined by the respective lenders.

4. Vehicle Loan Interest Rates

Vehicle loans, also known as auto or car loans, are secured loans where the vehicle being purchased acts as the collateral. This is a fairly flexible option; however, interest rates are comparatively more affordable than personal loans.

Here is a list of the top vehicle loan interest rates in India:

Bank / NBFC	Interest Rate (per annum)
State Bank of India	8.85%* – 9.80%*
Bank of India	8.85%* onwards
ICICI Bank	9.00%* onwards
Axis Bank	9.30%* onwards
HDFC Bank	8.75%* onwards
Canara Bank	9.25%* onwards
Federal Bank	12.55%* onwards
Punjab National Bank	9.30%* onwards
Union Bank of India	9.30%* onwards
Bank of Baroda	8.70%* onwards
Tata Capital	10.75%* onwards
Mahindra Finance	12.00%* onwards
Sundaram Finance	Varies based on profile
HDB Financial Services	Varies based on profile
Shriram Finance	11.50%* onwards

*Please be aware that interest rates may change periodically, as determined by the respective lenders.

5. Loan Against Property (LAP) Interest Rates

A Loan Against Property allows you to leverage your existing property to secure a substantial loan amount for various personal or business needs.

Here is a list of the top LAP interest rates in India:

Bank / NBFC	Interest Rate (per annum)
Bank of India	10.85%* onwards
Bank of Baroda	10.85%* – 16.50%*
Federal Bank	12.60%* onwards
Central Bank of India	10.15%* onwards
HDFC Bank	9.40%* onwards
State Bank of India	10.00%* – 11.30%*
IDFC First Bank	9.00%* onwards
ICICI Bank	10.85%* – 12.50%*
Kotak Mahindra Bank	9.50%* onwards
Axis Bank	10.50%* – 10.90%*
Bajaj Housing Finance	9.75%* – 18.00%*
Tata Capital	10.10%* onwards
LIC Housing Finance	9.70%* – 12.85%*
PNB Housing Finance	9.65%* – 13.00%*
Aditya Birla Capital	10.50%* – 17.5%*

*Please be aware that interest rates may change periodically, as determined by the respective lenders.

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6. Education Loan Interest Rates

Education loans are designed to support students in pursuing their academic goals by covering tuition fees, living expenses, and other related costs. This means they often come at lower interest rates and are highly flexible, as the amount can be reduced with the assistance of government schemes.

Here is a list of the top education loan interest rates in India:

Bank / NBFC	Interest Rate (per annum)
State Bank of India	8.55%* onwards
Bank of Baroda	8.15%* – 11.15%*
Union Bank of India	11.25%* onwards
Axis Bank	13.70%* – 15.20%*
ICICI Bank	10.50%* onwards
IDFC First Bank	Varies based on profile
HDFC Bank	9.50%* onwards
Punjab National Bank	9.25%* onwards
Canara Bank	9.25%* onwards
Bank of India	10.85%* onwards
Avanse	12.50%* – 13.50%*
HDFC Credila	11.00%* onwards
InCred	11.50%* onwards
Auxilo	12.30%* onwards
Propelld	10.75%* onwards

*Please be aware that interest rates may change periodically, as determined by the respective lenders.

7. Business Loan Interest Rates

Business loans provide the necessary capital for entrepreneurs and businesses to grow, innovate, and manage their operations effectively.

Here is a list of the top business loan interest rates in India:

Bank / NBFC	Interest Rate (per annum)
Yes Bank	14.00%* – 19.00%*
RBL Bank	17.50%* – 26.00%*
ICICI Bank	11.25%* onwards
HDFC Bank	10.75%* – 22.50%*
IDFC FIRST Bank	12.00%* onwards
State Bank of India	11.30%* – 14.30%*
Axis Bank	11.00%* – 22.00%*
Bank of Baroda	10.85%* onwards
Punjab National Bank	10.40%* onwards
Kotak Mahindra Bank	16.00%* onwards
Bajaj Finserv	9.75%* – 30.00%*
Tata Capital	12.00%* onwards
Lendingkart Finance	12.00%* – 27.00%*
FlexiLoans	12.00%* onwards
NeoGrowth Finance	19.00%* – 24.00%*

*Please be aware that interest rates may change periodically, as determined by the respective lenders.

8. Credit Card Interest Rates

Credit cards offer a revolving line of credit, and the interest is charged only on the outstanding balance that is not paid by the due date. The interest rates on credit cards are typically high.

Here is a list of the top credit card options and their interest rates in India:

Bank / NBFC	Interest Rate (per month)
HDFC Bank	1.99%* – 3.60%*
SBI Card	2.75%* – 3.50%*
Axis Bank	1.50%* – 3.60%*
ICICI Bank	2.49%* – 3.67%*
HSBC Bank	3.30%* onwards
Citibank	3.75%* onwards
Standard Chartered Bank	3.49%* onwards
American Express	1.25%* – 3.50%*
RBL Bank	3.99%* onwards
IndusInd Bank	1.79%* – 3.83%*
Bajaj Finserv RBL	Up to 3.99%*
Tata Capital (Co-branded)	Varies by card partner
SBI Card (Standalone NBFC)	2.75%* – 3.50%*
BOB Financial Solutions	Varies by card

*Please be aware that interest rates may change periodically, as determined by the respective lenders.

Some NBFCs also offer co-branded credit cards.

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9. Loan Against Fixed Deposit Interest Rates

This is a secured loan where you can borrow against your fixed deposit at a relatively low-interest rate, which is usually a certain percentage above the FD interest rate.

Bank / NBFC	Interest Rate (per annum)
IDFC FIRST Bank	FD Rate + 2.00%*
South Indian Bank	FD Rate + 2.00%*
HDFC Bank	FD Rate + 1.00%*
ICICI Bank	FD Rate + 2.00%*
Axis Bank	FD Rate + 2.00%*
State Bank of India	FD Rate + 1.00%*
Punjab National Bank	FD Rate + 1.00%*
Bank of Baroda	FD Rate + 1.50%*
Canara Bank	FD Rate + 2.00%*
Union Bank of India	FD Rate + 2.00%*
Bajaj Finserv	Varies (against any bank’s FD)
Shriram Finance	Varies (against any bank’s FD)
Muthoot Capital	Varies

*Please be aware that interest rates may change periodically, as determined by the respective lenders.

10. Loan Against Securities Interest Rates

This loan allows you to borrow against your investments in shares, mutual funds, and bonds. The interest rates are generally lower than unsecured loans.

Bank / NBFC	Interest Rate (per annum)
ICICI Bank	9.90%* – 11.75%*
HDFC Bank	9.90%* onwards
State Bank of India	11.15%* onwards
Axis Bank	10.50%* onwards
Kotak Mahindra Bank	9.49%* onwards
Yes Bank	10.00%* onwards
IndusInd Bank	9.00%* onwards
Bank of Baroda	10.15%* onwards
Karur Vysya Bank	12.35%* onwards
City Union Bank	12.25%* onwards
Bajaj Finserv	10.50%* – 18.00%*
Tata Capital	10.50%* onwards
IIFL Securities	10.00%* – 12.50%*
Zerodha Capital	10.50%* onwards
Motilal Oswal	Up to 18.00%*

*Please be aware that interest rates may change periodically, as determined by the respective lenders.

Top 10 Banks With Best Loan Options

Choosing the right bank for your loan is as important as choosing the right loan type. The best bank for you will depend on your specific needs, eligibility, and the interest rates offered. Here is a list of banks that are best suited for specific loan types.

Loan Type	Best Bank	Interest Rate (per annum)
Personal Loan	Axis Bank	9.99%* onwards
Home Loan	Central Bank of India / Bank of India / Union Bank of India	7.35%* onwards
Gold Loan	Axis Bank	8.00%* onwards
Vehicle Loan	Bank of Baroda	8.70%* onwards
Loan Against Property	Bajaj Housing Finance	8.50%* onwards
Education Loan	Bank of Baroda	7.15%* onwards
Business Loan	IDFC FIRST Bank	12.99%* onwards
Credit Card	HDFC Bank	Up to 3.40%* per month
Loan Against Fixed Deposit	State Bank of India	1.00%* over FD rate
Loan Against Securities	HDFC Bank	6.75%* onwards (Debt)

*Note: The interest rates are subject to change upon the bank’s discretion. So please use this as a basis for comparison and then refer to the bank’s website for the most recent updates.

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Conclusion

The world of bank loans is vast and varied, offering a solution for nearly every financial requirement. By understanding the different types of loans, their interest rates, and the offerings of various banks, you can make a well-informed decision that empowers you to achieve your financial goals without undue stress.

Remember to carefully assess your needs, evaluate your repayment capacity, and compare the offerings of multiple lenders before finalising your loan agreement.

A well-researched loan can be a powerful tool for wealth creation and financial well-being.

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Frequently Asked Questions

Find answers to common questions about this topic

The Indian banking sector broadly categorises credit into Secured Loans (Home, Vehicle, Gold, Loan Against Property) and Unsecured Loans (Personal Loans, Credit Cards). Secured loans require collateral but offer lower interest rates (starting ~8.35% p.a.), while unsecured loans rely entirely on your CIBIL score and income stability, often carrying higher rates (10.50% p.a. onwards).

Home Loans typically offer the lowest interest rates, currently ranging between 8.35% and 8.50% p.a., as they are backed by high-value real estate. In contrast, Credit Cards are the most expensive form of credit, with annualized interest rates (APR) often touching 42-48% if the total due isn't paid on time.

While both use property as collateral, the end-use differs significantly. A Home Loan is exclusively for purchasing a property, offering higher LTV (up to 90%) and tax benefits. A Loan Against Property allows you to mortgage an existing property to fund business or personal needs, usually capped at 60-70% LTV with slightly higher interest rates.

Yes, for Education Loans up to ₹4 Lakhs, banks in India do not require any collateral or third-party guarantee. For loans between ₹4 Lakhs and ₹7.5 Lakhs, a third-party guarantee is usually needed. Collateral is mandatory only for loan amounts exceeding ₹7.5 Lakhs, though specific schemes for premier institutes (like IITs/IIMs) may waive this.

A Flat Interest Rate calculates interest on the entire principal for the full tenure, making it significantly more expensive. A Reducing Balance Rate calculates interest only on the outstanding principal amount, which decreases with every EMI paid. Always convert a flat rate quote to its Reducing Balance equivalent (APR) to see the true cost of borrowing.

Unlike standard loans where you pay monthly EMIs consisting of principal and interest, Gold Loans often offer a Bullet Repayment structure. This allows you to pay the entire principal and accumulated interest in one shot at the end of the loan tenure, providing better monthly cash flow management for borrowers.

No, your Fixed Deposit continues to earn interest at the original contracted rate. The bank simply marks a lien on it. The interest charged on the Loan Against Fixed Deposit is typically just 1% to 2% higher than the interest your FD earns, making it the cheapest way to access liquidity without breaking your investment.

Ex-Showroom price covers only the cost of the vehicle and taxes paid to the dealer. On-Road price includes registration, road tax, and insurance. When choosing a Vehicle Loan, always prefer lenders offering 85-90% funding on the 'On-Road' price to minimize your out-of-pocket down payment expenses.

Most new floating-rate loans are linked to the RLLR, an external benchmark set by the RBI. This ensures transparency, meaning if the RBI cuts the Repo Rate, your Home Loan interest rate drops quickly. However, it also means your EMI will increase immediately if the RBI hikes rates to control inflation.

Traditional term loans often require collateral, but the government's CGTMSE scheme allows banks to offer collateral-free Business Loans up to ₹2 Crores (limit varies by bank) to MSMEs. However, these unsecured loans carry a ‘risk premium’, meaning the interest rate will be higher compared to a secured facility.