Nowadays, numerous financial institutions like banks and NBFCs offer various types of personal loans. If you ever face a situation where you need to get personal loan, you might be overwhelmed by the options presented in front of you. Since it is essential to choose the right lender, it is important to evaluate certain factors before selecting one to avoid future regrets.
These are the main five things you should do when choosing the right personal loan lender.
Compare Interest Rates
If you choose to get personal loan, the first thing you should do is evaluate the interest rate. Personal loan rates could range from 11% p.a. to 28% p.a. and are some of the highest rates among various types of loans. When you opt for an extended repayment tenure, like 4 to 5 years, you could pay much more than the principal amount.
Competing banks may provide attractive offers by minimally reducing the annual personal loan rates by 0.20% to 0.50%. They could also offer ‘no-cost EMI’ options but compensate for the loss by eliminating cash discounts or increasing processing fee interest rates.
If you want to negotiate a better interest rate, you need a good credit history and a high credit. Compare competing financial institutions, check your total outgo, and then make an informed decision when choosing a personal loan lender.
Evaluate Other Costs
You will also pay several other fees when you get a personal loan. Financial institutions usually charge a processing fee that is either fixed or 1% to 3% of the loan amount. Most banks charge pre-payment fees if you want to foreclose your loan, which can range from 2% to 5%. Thus, it is essential to read the fine print, understand all charges involved and then calculate the total cost of the loan before finalising the lender.
Know Your Loan Amount
‘Why’ and ‘how much’ are two questions you should have answers to before approaching a lender to get personal loan. Lenders have minimum and maximum loan amounts they can offer. The loan amount you receive will depend on your financial needs, credit score, history, and eligibility. It is always better to compare different lenders to find out which one would be able to offer a sufficient loan amount at affordable personal loan rates.
What is the Processing Time
While regular personal loans can take some time to receive, financial institutions offer various types of pre-approved and instant personal loans, which can be obtained quickly. These loans are usually reserved for existing customers with good credit scores.
If you require funds urgently, it is best to visit your primary bank first since they can instantly provide you with a loan at favourable personal loan rates. It is best to note that some instant loans can be transferred within a few minutes to 48 hours, while regular personal loans may take anywhere from 7 to 15 days, depending on the lender’s policy.
How is the Customer Service
When you take a loan, you may require the support of your lender on various occasions. Even though most borrowers do not consider customer service while selecting a lender, poor customer service can lead to future regrets. Hence, choosing a lender with a track record of good customer reviews is crucial. Check online reviews, verify the lender’s performance, and settle on the most trustworthy one.
It is essential to consider all these factors while choosing the most suitable lender. Remember to do your research and compare the various options available before settling on an appropriate lender. If you have a good credit score and history, always negotiate to crack a better deal and get personal loan at advantageous rates.