Less documentation, instant approval, unsafe nature and no restrictions on use. All these things are liked by people struggling with lack of money in personal loans. Customers are very impressed due to easy loan and they ignore some important aspects which can help them to get the best deal. To choose a personal loan lender, you should compare the personal loan interest rates, eligibility criteria, repayment period, EMI options, processing charges and prepayment / foreclosure charges.
How to choose a personal loan lender
Interest rates affect the full cost, instalment amount and repayment period of the personal loan. Various banks and NBFCs (non-banking financial companies) offer loans in the range of 10.50-27 percent at competitive interest rates. Therefore it is important that the interest rates of all are compared. You should choose a lender who offers a loan at affordable interest rates according to your needs and eligibility.
Eligibility includes your age, credit score, salary / income, employment status and sometimes the city where the client is staying. Every lender has its own eligibility criterion. Some lenders are willing to give loans to low-income applicants as well, while some prefer only those with higher salaries. The minimum age of getting a personal loan for employed people is 21 years. But there are also lenders who give personal loans only to those aged 25 years.
Each lender offers different loan amounts. Its range is from 50 thousand rupees to 30 lakh rupees. The duration of the loan will depend on your age and repayment capacity. You should compare the minimum and maximum loan amount of different lenders. Depending on your eligibility and needs, go to a lender who gives you a loan on favorable terms.
This is the period in which you have to repay the loan amount with interest. Each lender decides the payment period differently. Generally, you will get a personal loan in a flexible period of 12-60 months. It is important that you compare the payment period of various lenders so that you can choose the right period according to your convenience.
The processing charge is a fee that you have to pay to banks or NBFCs, for which you get a personal loan for credit checks, documentation and underwriting. This fee has to be paid once and it is deducted from your loan amount only. Usually the processing fee has to be paid only after the personal loan application is approved.
For private loans, lenders charge processing fees ranging from 0.50% to 5% of the principal loan amount + GST. Since the processing fee is one of the most important parts of the cost of a personal loan, you should compare the processing fees before applying for a personal loan.
Prepayment or foreclosure charges
Personal loan prepayment or foreclosure charge is the fee that you pay to the lender when you pay the whole or some amount before the end of the loan term. Every lender has its own prepayment policy. Some lenders have a lock-in period such as 6 months or a year, in which prepayment charge is levied on any payment made before the end of the period. At the same time, there are some lenders who do not impose any prepayment or foreclosure charge on the customers from the beginning of the payment period.
Therefore, you should compare the prepayment fees of various lenders. If you think that you will repay the loan at any time in the future, then you should apply for such a personal loan, in which there is no prepayment charge. Prepayment charges are based on a percentage of the outstanding balance.
You should not fall into the temptation to get funds easily. First compare the features like interest rates, eligibility criteria, EMI, foreclosure charges etc. By comparing rates, terms and conditions, you can save a lot of money in the form of interest rate. Also avoid rejections and do not let the situation of harassment arise after the loan amount is approved.