Personal loans are one of the convenient financial resources you can use, when facing difficulties to meet your expenses. The best part about an unsecured personal loan is that you do not need collateral to avail of the facility. Many lenders quickly approve personal loans, provided you have good creditworthiness.
You can use personal loan funds to meet any financial need like travel, house renovation, marriage expenses, etc. However, to make the loan profitable and ensure maximum savings, you should know how to choose the best personal loan.
How to Choose a Personal Loan?
The market is flooded with different lenders. You must research and compare various offerings. Here are few considerations to keep in mind while choosing the best personal loan.
1. Know Your Goals
What is your personal loan objective? Do you need the loan urgently? Do you want to save the maximum on the loan by getting it at the lowest interest rate possible? Are you looking forward to paying the loan gradually over several years? Determine your goals and then look for a personal loan accordingly.
2. Easy Eligibility
If you are looking for a personal loan in the least possible time, then the first criterion for choosing the personal loan should be easy eligibility. It would help if you aimed to pick a lender who can provide loans on an urgent basis. This means a lender who can quickly offer the loan without needing you to indulge in lengthy documentation formalities. There are lenders in the market who have easy eligibility criteria. This will help you get quick funds, low efforts, and time in the approval process.
3. Low Interest Rate
You should always prefer taking a personal loan with a low interest rate if your goal is maximum savings. To choose a lender that offers the least interest rate, you should compare various propositions of different banks. However, several factors, like your credit score, play an important role in determining your interest rate. The Lenders often check your repayment ability and credit health to see whether you will repay the loan timely. They are pleased to offer loans at a low interest rate if you have a high creditworthiness.
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4. Know Additional Fee
Sometimes, the lenders levy hidden fees on personal loans. Before finalizing the loan, you should know about all the charges involved in the personal loan. Personal loans often charge a meager processing fee of 1% to 2%. However, some lenders might charge additional administrative fees, security fees, and more.
Be informed that the lenders charge a prepayment fee. This fee is levied when the borrower wants to pay a part of the amount earlier than the agreed tenure. Even the foreclosure fee is applicable when the borrower decides to pay the entire loan amount before the loan tenure. While nearly most lenders charge these fees, some charge even more. You must not select a personal loan that offers a low interest rate but levies additional fees. This way, they will only sound like they are offering a great deal, but the loan does not remain lucrative by charging a lot of fees!
5. Loan Repayment
Another important thing to consider is your loan repayment plan or how much the borrower will pay monthly. Know the loan repayment terms, including interest rate, loan tenure, etc. Some lenders offer flexible repayment options customized according to the borrower’s needs.
Prefer a lender who can provide you with a flexible tenor for repayment. It will make your loan repayment easier by spreading your EMIs conveniently. You can repay the loan amount according to your affordability. This will keep your payments on track and lower the possibility of default.
Wrapping Up
Choosing a personal loan can directly impact your savings and peace of mind. Research different options, analyze your borrowing needs, find the best rates and terms, and apply for the loan!
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Disclaimer: This article provides a general guide to the subject matter. You should seek specialist advice about your specific circumstances.
FAQs
1. What can be maximum repayment tenure for a personal loan?
Loan repayment tenure for personal loans depends on the lender. However, mostly it ranges from 1 to 5 years.
2. How much is the interest rate for a personal loan?
The interest rates on personal loans are around 10% to 12% per annum or more. Be informed that interest rates depend on the lender’s policies, economic factors, borrower’s credit score, etc.
3. How much personal loan amount can I get?
The amount of personal loans in India depends on your credit history, lender, income, etc. Most lenders allow a maximum of 25 Lacs of personal loan.
4. What happens if I want to do prepayment or foreclose the personal loan?
If you plan prepayment or foreclosing of a personal loan, you must pay a prepayment or foreclosure fee to the lender. But this will allow you to save interest by paying off the loan early.
5. Why is a credit score important for getting a personal loan?
The lenders determine your eligibility for a personal loan based on your credit score. The higher your score, the higher the loan amount, the quicker the loan approval, and the lower the interest rate.
6. How to choose a personal loan?
Know your goals, look for least interest rate, easy eligibility, additional charges, and flexible repayment terms to make the best choice.