When faced with a financial emergency or cash shortage, personal loans are appropriate. Obtaining a personal loan is now much simpler and quicker than it was ten years ago thanks to the abundance of banks and Non-Banking Financial Companies (NBFCs) that offer various types of personal loans, including regular personal loans, instant personal loans, pre-approved personal loans, pre-qualified personal loans, etc.
However, making a hasty selection or selecting the wrong personal loan finance company or lender will leave you disappointed in the end. To prevent similar disappointments in the future, read this post before choosing a personal loan because it will assist you in selecting the best personal loan provider.
Criteria for Selecting A Personal Loan Finance Company
When selecting the best Personal Loan lender, consider the following five criteria:
1. Interest Rate
Since personal loans have the highest interest rates, which typically vary from 11% per year to 28% per year, this should be the main determining factor when selecting the Personal Loan Lender. You wind up paying much more than the principle amount if your payback period is greater than the required 4-5 years.
Many banks entice customers with various offers by only slightly lowering the yearly interest rate by 20 basis points to 50 basis points (i.e., 0.20% to 0.50% p.a.). Ideally, if your credit score is high and your credit history is good, you can use this as leverage to bargain with your bank for a lower interest rate.
Additionally, a lot of lenders provide zero-interest or no-cost EMIs for consumer durable purchases. However, lenders frequently deduct interest on processing fees or refuse to provide cash discounts that you would otherwise receive. Because of this, you should assess and contrast your whole expenditures before choosing a personal loan lender.
2. Other Fees
You have to pay more than just the interest rate to obtain a loan. The cost of processing your loan application is determined by banks or other financial organisations. This processing fee, which may be a flat rate or comprise 1% to 3% of the loan amount, will raise the price of your loan significantly.
Furthermore, whenever you have enough money, it is wise to foreclose on your loans to avoid paying interest on future EMIs. You should be aware that if you wish to foreclose on your personal loan, the majority of banks and financial institutions levy pre-payment costs.
The fees vary from business to business and often range from 2% to 5%, which makes a significant difference, particularly when the dues are substantial. Therefore, it is wise to estimate the overall cost of the loan before choosing a personal loan finance company, taking into account all fees and penalties.
3. Loan Quantity
The minimum and maximum personal loan amounts that lenders may grant to a single borrower are regulated. Therefore, before approaching a lender, you should be clear about why you need the money and how much you actually need, as the lender should be able to provide enough money at a reasonable rate of interest depending on your financial circumstances.
Additionally, the loan amount may change based on your personal loan eligibility criteria and credit history. Therefore, it makes sense to compare several lenders based on the loan amount they are willing to extend to you, and then select the one who can do so at an affordable interest rate.
4. Processing Period
As was already said, there are various sorts of personal loans available nowadays from banks and NBFCs. Compared to regular personal loans, instant and pre-approved loans can be obtained more rapidly because they are frequently provided to repeat customers with good credit histories. If you need money right away, it’s best to check with your primary bank or existing lender first.
They may be able to provide you with a personal loan right away at a competitive interest rate. A few minutes to 48 hours may pass before you may apply for some rapid loans. Contrarily, depending on the lender’s policies and your credit history, regular personal loans may take anywhere between 7 and 15 days to process.
5. Customer Service
Although taking out a loan is a one-time event, you will require your lender’s help on multiple occasions. Many consumers do not take customer service into account when selecting a loan, but if it is subpar, you may later be dissatisfied. Therefore, it is crucial to make a sensible choice of a lender that offers positive client ratings. Online customer reviews can be checked to help you decide.
Since almost all banks and NBFCs provide personal loans, there are many options available when applying for one. However, to reap the greatest rewards, be careful to evaluate several lenders on the many factors mentioned above and then select the best personal loan finance company.
The best option in an emergency is a personal loan, especially if you have no other financial assistance and urgently need money, provided you meet the personal loan eligibility criteria. Sadly, people sometimes ask for personal loans to receive instant satisfaction and stress themselves out by making high EMI payments. So, consider twice before taking out a personal loan to purchase that luxury item, jewelry, or device that can be put off simply.