A personal loan can help you in many ways in times of need. It is the quickest way you can arrange for cash without offering anything as collateral. However the unsecured nature of these loans makes it a risky proposition for the lenders and they usually compensate for this risk by charging high rate of interest. Since it is expensive to take a personal loan as compared to other forms of debt, you need to make sure that you crack the best deal so that the loan repayments don’t become unmanageable.
You can easily find out the details and terms and conditions set by different banks and weigh your options online. But before you do so, the first and the most important thing that you must do is to check your CIBIL score. Your credit score is the prime attribute that banks check to determine your credibility. Since personal loans are unsecured, banks prefer lending to only those people who have a good CIBIL score. Hence it is good to see whether your score satisfies the eligibility criteria set by the bank.
Now let’s see the important parameters based on which you can compare the personal loans online.
Interest rate– Needless to say, the cost of borrowing is the prime factor that needs to be compared when you weigh different options. Find out the interest rates on which the banks and other financial institutions offer the personal loans. Also check whether banks offer loans at discounted rates in case you have an exceptionally good credit score. Sometimes banks are willing to lower the interest rate if the risk associated with lending money is extremely low. So shop around to get the best rates.
Method of interest calculation- Do not just fall for the lowest rate option. Check whether the bank charges a flat interest rate or reducing balance rate. In case of flat interest rate the interest is calculated on the total loan amount irrespective of what has already been paid. In reducing balance method, interest is calculated on the outstanding loan balance. So before comparing the interest rate numbers make sure that the methods that you are comparing are same. The flat rate interest may be lower, but it may turn out to be expensive in the long run.
Duration- The duration of the loan also plays an important role, since it directly affects the EMI amount. If the bank offers loans for shorter duration, you may not be able to afford the monthly instalment amount. In that case, you may check which banks offer flexibility of longer duration. On the other hand, if you want to save on interest costs, you may choose a loan option with a shorter duration.
Other charges- It is important to consider the total cost of the loan while comparing different options than just the interest rates. Find out the processing charges and other documentation charges that you need to pay when you apply for the loan. While some banks charge a fixed fee others charge a percentage of the approved loan amount. Some lenders make it mandatory for you to take an insurance policy along with the loan. Watch out for such clauses. Also find out about the late payment fee that the bank charges in case you miss a payment. This will make you aware of the risks involved in case you are not able to repay the loan on time.
Prepayment penalty- Some banks charge you a heavy prepayment penalty in case you pay the loan early. If you need a personal loan to meet some short term needs and wish to pay it back as soon as your cash situation improves, you may prefer a bank that does not charge any prepayment penalty. For example in case of ICICI Bank personal loan the foreclosure charges are zero above 10 lakh & 12 EMI Paid, Otherwise 5%.
Apart from the above parameters you may also find out about the eligibility requirements of the banks before they offer personal loans. Banks have a minimum salary requirement for a specific loan amount. Some banks offer higher loan amount and lower interest rate to people working with big size popular companies. Some also consider the number of years of experience that you have.
Your email address will not be published. Required fields are marked *
Nice Article. There is always pros and cons of every aspect. Indian Cu ...
Thanks for finally writing about >Why Indian women fall short on cr ...
Thank you for sharing your infօ. I reɑlly appreciate yⲟur efforts and ...
Daily Tips to stay Credit Healthy
© All Rights Reserved at Credit Sudhaar