How to Find the Best Personal Loan for You. Key Factors

Determine the Loan Amount

The first step towards finding the right personal loan for you is determining the loan amount you need. Assess your financial requirements and borrow only the amount you need and not more than that.

Consider the processing costs when taking a loan so that you can effectively compare between lenders and decide whose offers best suit your financial needs.

Compare Interest Rates and Fees

When you obtain a personal loan, you are charged an Annual Percentage Rate (APR), which consists of the interest rate and other fees. You can negotiate on the interest rate and fees when applying for a loan. Compare the APRs of various lenders and opt for a lender that offers loans at a lower Annual Percentage Rate.

Along with APR, consider the late payment penalties, prepayment penalties and the processing fees charged by the lenders. This will give you an accurate idea of the borrowing cost upfront so you can make an informed decision.

Assess Repayment Flexibility

Choosing the right loan tenure is crucial when availing a personal loan. If you opt for a longer tenure, your EMI burden will reduce, but you will be charged higher interest. Whereas, if you choose a shorter loan tenure, your EMIs will be higher, but you can become debt-free quickly.

Hence, pick a tenure that suits your repayment capacity and financial requirements. Different lenders have different repayment periods. Go for a lender with a flexible repayment period to pay off your debt quickly.

Identify the Eligibility Criteria and Documents Required

Find out the eligibility criteria of different lenders and the documents required before applying for the loan. Eligible criteria vary from different vendors, because if you apply for a loan and the lenders reject your application due to ineligibility, it drags down your credit score.

Figure out the credit score, minimum salary, income, and other eligibility criteria of financial institutions to find out if you qualify for a personal loan. Once you know you’re eligible, determine the documents required, like KYC, income proof, etc, so you can keep your documents ready before applying for the loan.

Compare Lenders and Their Fees

Once you collect all necessary information, shortlist lenders and compare them to pick the lender who offers loans at a better interest rate with the lowest costs. Consider the following factors to compare lenders:

• Interest Rates

Interest on a loan is the biggest cost of borrowing, so the lower the interest rate, the better. Go for a lender that provides the lowest interest rate amongst as even the smallest difference in interest rate can significantly impact your EMI payments.

• Processing Fees

All lenders charge a processing fee when providing a loan. Processing fees can range from 2-4% of the loan amount, since it is an added cost to your loan, opt for a lender with the lowest processing fee.

• Additional Charges

Some lenders levy a pre-closure fee if you choose to partially or fully repay your loan amount before the time. Choose a lender that does not charge any foreclosure or pre-closure fees.

• Loan Disbursal Period

One of the main features of a personal loan is that it can be availed instantly during financial emergencies. Hence, the loan disbursal period is an important factor when choosing a lender.

• Application Process

You can avail a personal loan online by visiting the web portal of the lender or downloading their mobile application. Go for a lender who offers online loan applications with paperless documentation, which speeds up the process and ensures you get your loan quickly.