The personal loans portfolio of banks and NBFCs reached Rs15.95 lakh crore in December 2025, growing 11.6 per cent year-on-year and 3.5 per cent quarter-on-quarter. Active personal loan accounts rose to 130.32 crore, growing 13.5 per cent YoY, reflecting continued demand for smaller-ticket loans. While home loans still make up a larger share of total loan value, no other credit product matches personal loans in terms of reach and availability. Indians are now borrowing mainly not to buy houses, but for weddings, medical emergencies and even their children’s education, where personal loans are often their first choice.
Personal loans offer quick access to funds without collateral and can help during emergencies. But, as they carry higher interest rates, they can become a debt burden if repayment discipline is weak. India’s personal loan market has grown rapidly and is now among the fastest-growing retail credit segments, driven by digital lending, consumption demand and easy app-based access.
“One should opt for a personal loan only for genuine needs like medical emergencies or urgent cash flow gaps. Borrowers should compare interest rates, processing fees, hidden charges, EMI affordability and lender credibility, and avoid overleveraging beyond 30-40 per cent of monthly income toward EMIs. The trend in India shows strong growth in small-ticket and instant digital personal loans, especially among young salaried borrowers; interest rates generally range from 10 per cent to 24 per cent depending on credit score and lender profile,” said Aditya Agrawal, chief investment officer, Avisa Wealth Creators.
A credit score above 750 will help borrowers get faster approvals. “It also gives them a better chance to negotiate for lower interest rates,” said Sarika Grover, co-founder of Loans Jagat.”You will also have to pay processing fees of anywhere between Rs999 and 3 per cent of the loan amount. Since personal loans are usually given for shorter periods, these charges can sometimes make the overall loan more expensive.”
Checking out offers from multiple banks is a good idea. So is reassessing the existing loans. “If your monthly payments is more than 40 per cent, consider the option of loan consolidation. Also, one should borrow only what is required; not the entire sanctioned amount,” said Grover.
Personal loans through apps and NBFCs were booming in India, but the growth slowed down of late owing to strict RBI norms in the unsecured sector. In April 2026, personal loan rates started from 9.99 per cent at private banks like Axis Bank, HDFC Bank, and ICICI Bank. NBFCs charge higher rates, and some fintech lenders charged up to 36 per cent for new borrowers. NBFCs handled most personal loan accounts than banks in the third quarter FY26, which shows that many borrowers now prefer digital and non-bank lenders for quick credit.