Jul 25, 2022
Listen How to choose the right personal lender?
Personal loans are ideal in times of financial emergency and shortage of cash. With many banks and non-bank financial companies (NBFCs) offering different types of personal loans, such as regular personal loans, instant personal loans, pre-approved personal loans, pre-qualified personal loans, etc., and the aggressively promoting, getting a personal loan has become much easier and faster than it was ten years ago. That said, making a hasty decision and not choosing the right personal loan and the right lender can lead to future disappointment. Read this article before opting for a personal loan to avoid such disappointments in the future, as it will help you choose the right personal lender.
Here are 5 important things you need to consider when choosing the right personal lender:
1. Interest rate:
When choosing the personal lender, the interest rate should be the main deciding factor because personal loans have the highest interest rate, and it usually ranges from 11% per annum to 28% per annum When your term of repayment is a longer duration of 4- 5 years, you end up paying much more than the principal amount. Many banks attract customers with different offers by slightly reducing the annual interest rate by 20 basis points to 50 basis points (i.e. from 0.20% to 0.50% per annum) . Preferably, if your credit history is strong and your credit score is high, you can use this as leverage to negotiate a better interest rate with your bank. Additionally, many lenders offer no-cost EMIs or zero-interest EMIs on purchases of consumer durables. However, lenders often recoup the interest amount on the processing fee or don’t give the discounts you would otherwise get. Therefore, you need to check and compare your total expenses and make an informed decision when choosing a personal lender.
2. Other costs:
The interest rate is not the only cost you pay to qualify for a loan. Banks or financial institutions charge a certain amount to process your loan application. This processing fee can be a lump sum or can vary from 1% to 3% of the loan amount and can significantly increase the cost of your loan.
Also, it is prudent to seize your loans to save interest payments on future EMIs whenever you have sufficient funds. You should know that most banks and financial institutions charge a prepayment fee if you want to grab your personal loan. Fees vary from company to company and generally range between 2% and 5%, which makes a big difference, especially when the dues are high.
Therefore, it is advisable to consider all fees and charges and calculate the total cost of the loan before finalizing the lender.
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3. Loan amount:
Lenders have limits on the minimum and maximum amount of personal loan they can offer to a single borrower. Therefore, before approaching a lender, you must be clear about why you need the funds and what is the exact amount you need because according to your financial needs, the lender must be able to offer sufficient funds to an affordable interest rate. The loan amount may also vary depending on your eligibility and credit profile. Therefore, it makes sense to compare different lenders on the parameter of the loan amount they offer you and choose the one who can offer sufficient loan amount at an affordable interest rate.
4. Processing time:
As stated above, nowadays banks and NBFCs offer different types of personal loans. Instant personal loans and pre-approved personal loans can be used quickly compared to regular personal loans, as these loans are usually offered to existing customers with good credit history. If you are in urgent need of funds, it is advisable to check with your existing lender or your main bank, who can offer you a personal loan instantly at an attractive interest rate. Some instant loans can be obtained within minutes to 48 hours. While regular personal loans can take up to 7-15 days depending on the lender’s policy and your credit profile.
5. Customer service:
Although taking out a loan is a one-time experience, you will need the help of your lender in several situations. Many borrowers do not take this into account when choosing a lender, but if the lender’s customer service is not satisfactory, you may be disappointed in the future. Therefore, it is essential to wisely choose a lender who offers good customer reviews. You can check customer reviews online and make your decision.
When it comes to availing a personal loan, there are a plethora of options as almost all banks and NBFC offer personal loans. However, in order to get the maximum benefits, make sure to compare different lenders on different parameters explained above. A personal loan is the best choice in an emergency, especially when you have no other financial support and are in dire need of funds. Unfortunately, people often apply for personal loans for instant gratification and pressure themselves into paying hefty EMIs. So if you want to buy that gadget, jewelry or luxury item that can easily be carried over, think again and don’t take out a personal loan.