How to choose the right personal loan lender
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How to choose the right personal loan lender

  • Highlights

  • Shop for the ideal lender and compare loans

  • See if the loan amount matches your needs

  • Read the loan documents with utmost care

  • Check prepayments terms and understand penalties, if any

If you’re looking for ways to improve your quality of life, a personal loan can help you get started on the right foot. Pay for a better-furnished house, vacation or education with this loan instead of dipping into your savings. Why not enjoy the best today rather than wait until you can save up? To ensure that the personal loan is viable, you must ensure that you pick the right lender. Take a look at 5 pointers that you can use to evaluate lenders better.

•   Compare personal loan rates

Before you start the application process, it is important that you shop for the ideal personal loan that fits your needs. Lenders include traditional banks and NBFCs, all of whom charge different interest rates. Keep in mind that with every personal loan application, your credit score takes a small hit. So, your loan application should be the final step. First, compare loans, contact lenders and seek all the necessary information.

•   Check the loan amount

Depending on your needs, you may or may not know how much money you need in total. Choose a lender who offers a substantial loan amount that is sure to cover your expenses. You can also pick a lender who offers you more flexibility. Some lenders, such as Bajaj Finserv, offer a Flexi Personal Loan where you can withdraw the loan amount in parts, as and when you need funds. You only have to pay interest on the amount that you use and you can choose to pay EMI comprising only the interest. You can then repay the principal at the end of the tenor. This type of a loan is ideal for a home renovation, for example, wherein you have to make regular payments of varying sums to different service providers, and can’t be sure of how much money you actually need.

Additional Read: Personal Loan Up To Rs.25 Lakh Only With Bajaj Finserv

•   Read the fine print

Each loan provider will have a legal document dictating the terms of your personal loan. So, you must ensure that you read through the fine print and understand your obligation. Make sure that you are aware of and agree to all the conditions spelled out regarding the personal loan. If you have any doubts, contact the lender for clarity. This document is legally binding, so make sure you are comfortable with the terms it contains.

Flexi Loan Explained

•   Take note of processing charges

Lenders charge a processing fee of 2%–3%, exclusive of GST. This amount is deducted in from the loan amount that you are to receive. Find out what the lender is charging you to process your loan and then ascertain its affordability before applying for it. Check all the other associated charges too.

•   Check for prepayment charges and penalties

It is prudent to use any surplus income to make part prepayments towards your loan. This will help you pay lower interest. However, some lenders have stringent rules regarding prepayment accompanied by hefty charges. So, find out what these are and the minimum prepayment amount allowed. This will help you realise if you will be able to clear the loan quickly or not.

Use this checklist to screen all prospective personal loan providers to ensure that you get the best deal on your personal loan.

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