Personal loan is one of the favourite options for borrowers to avail funds. The loans are collateral-free which do not require any asset to be mortgaged. Thus, borrowers who don’t have assets to pledge for a loan can apply for a personal loan. Besides this benefit, personal loans are easy to avail since lenders approve the loans in the shortest possible time and can be used for any purpose.
Since the loans are quite popular, almost every lender in the country offers a personal loan to individuals. With so many options available, you can be confused about choosing the right loan for yourself. So, here are a few pointers which guide you to choose the right personal loan –
Find out which type of loan is required
Personal loans come in different variants for suiting different needs. There are travel loans, marriage loans, personal appliance loans, business loans, etc. So, before you apply for a personal loan, know the types of loans available. Match the loan variant to your financial requirement. See if there is any specific personal loan for your requirement or a generic personal loan would do the needful. Then choose the most suitable loan.
Know the loan amount required
After you have shortlisted the type of loan, assess the loan amount. It is always better to apply with lenders knowing the loan amount beforehand. This speeds up the loan application and approval process. You can use personal loan eligibility calculators to calculate the amount of loan which you can avail based on your eligibility qualifications.
Confirm that you fulfil the eligibility requirements
There are some eligibility qualifications which need to be fulfilled before the loan is allowed. Before applying with a lender, check whether you meet the prescribed criteria. Look out for the following which are the common criteria across all lenders –
- Age – between 21 and 65 years
- Income – INR 15, 000 for rural and semi-rural borrowers and INR 20, 000 for metro borrowers
- Work experience of 3 years
- Job stability in current organisation for the last 6-12 months
- Credit score of 650 and above
Check the interest rates
Personal loans have slightly higher interest rates since they are collateral-free loans. However, the interest rates differ across lenders. Before choosing the loan, you should compare the interest rates across different lenders. This comparison is possible online through the websites of loan aggregators. Choose a lender who offers the lowest interest rate as it would save your money on interest payments.
Know the fees and charges
While availing personal loans most of you limit yourselves to finding out the interest rates only. However, there are other fees and charges associated with the loan which should not be ignored because you would have to pay such charges from your own pockets. The first charge which you should check is the processing fee which is payable along with the loan application. Besides this compulsory charge also look at the other charges of the loan and choose a loan whose charges are low.
The available repayment options
What most of you don’t know is that personal loans allow multiple repayment options besides the traditional monthly instalments. You can increase your EMIs or prepay a part of the loan after a specified time. Similarly, there are other repayment options too which are offered by lenders. Understand the available repayment options to know how you can pay off the loan easily and affordable.
The prospective EMI
Lastly, you should find out the potential EMIs payable for the loan. The EMIs can be calculated using the online loan calculators. You can also change the calculated EMIs by changing the loan amount and/or the repayment tenure. Make sure that the EMIs are affordable for the loan you seek. If not, repaying the loan would be a financial burden. If you default you would not only have to pay high interest charges, it would spoil your credit score as well.
If you keep these pointers in mind, you can avail the best personal loan which would be issued at the earliest, be affordable to repay and provide you the necessary funds for meeting your financial obligations.