Personal loans are usually taken to cover immediate purposes including vacations, weddings, higher education, medical expenditure, home renovation and so on. There are several major public and private sector banks and NBFCs (non banking finance companies) offering personal loans in India. However, choosing between the same can often be pretty confusing.
The most important thing to remember here is that your own research and homework will work wonders when it comes to getting the best personal loan deal that meets your needs.
Major USPs of Personal Loans
Personal loans have several advantages. These include the following –
- No collateral/security is needed
- Big amounts are available as personal loans, usually ranging between Rs.50,000-30 lakhs depending on the financial institution
- The personal loan verification, approval and processing mechanisms are faster and hassle free in comparison to other loans. Most personal loans are disbursed within a week’s time and documentation is minimal
- No questions are asked regarding how you intend to use the money. The lender is only concerned about your ability to repay the loan in question
Choosing the Best Lender for Your Personal Loan
When it comes to choosing the right lender for taking a personal loan, you should always keep the following things in mind-
- Always check for banks and financial institutions in your neighborhood who are offering personal loans. However, there may be limits on the amount that a particular bank can sanction at times. In these cases, look for other institutions who sanction higher amounts.
- Gather information on all major banks close to you and then compare them for choosing the best option. You can then apply to the bank that you choose. Do not apply to multiple banks at the same time.
- Check the EMI per month that you will be required to fork out. You can multiply this EMI by the total loan tenor in order to find out how much you will have to pay as the extra amount (total interest). This can be done by using EMI calculators and you can do this for different banks in order to find out which one gives you the best deal.
- Compare the processing fees at different lenders in order to get an idea of how much you will need to spend.’
- In case you have an urgent requirement for funding, the disbursement timelines for a personal loan can assume huge importance. Compare this disbursement time period for different banks and NBFCs. A lender that dispatches personnel to your address for completing formalities will most likely complete the process faster than organizations which ask you to visit your nearest branch.
- Compare loan prepayment charges from various lenders in case you have plans to pay off your loan in lump sum amounts before the tenor ends. Choose financial institutions which have 0% prepayment charges.
- Compare interest rates offered by various lenders. Always go for the interest rate which is the lowest you can find since this will ensure lower and more comfortable EMIs for you.
Follow these tips towards choosing the best lender for your personal loan!