How Do You Choose the Right Personal Loan for 2020?

A personal loan is a great financial tool to bridge those gaps in financing for any need, be it a medical emergency, a shortfall in a travel budget, to buy a gadget or even to repay another debt. The best factors about personal loans are the ability to use it for any purpose, the ease in disbursal and documentation. 

Just like you could satisfy a variety of needs with a personal loan, there are many lenders and offers for a personal loan. This could confuse the applicant on how to choose the right personal loan when in need.

There are some simple points that you need to check out which could ensure that you pick the right one suited to your requirements. They are:

1. Pick Lenders with Transparent Eligibility Criteria

2. Check on the Time Taken for Disbursement

3. Maximum Loan Amount Offered

4. Compare Interest Rates

5. Check for Other Hidden Charges

6. Look for Ease in Availing the Loan

1. Pick Lenders with Transparent Eligibility Criteria:

Personal loans are chosen as it is easy to avail and comes without conditions on the use of the amount. So, it makes it imperative that the lender puts across transparent eligibility criteria for availing the loan. If the criteria are ambiguous then it would make it difficult for you to assess if you would be eligible for the loan. It would also help if the minimum credit score requirement is also mentioned beforehand so that you need not face rejection of the loan application later. 

For Ex: A fixed required income level like a minimum monthly income of Rs 15000 and above would be easy to understand than the one which just says income should match the loan amount. 

You can refer to the Hard Money Lenders for your reference.

2. Check on the Time Taken for Disbursement:

Often when applying for a loan, time is of great essence, especially when you are in situations like a medical emergency. If the lender can clearly specify the time taken for the disbursal of the loan, you can know your wait time in advance and make the decision of choosing that loan. 

For Example: Money View Personal Loans are disbursed in a matter of 2 hours from the time of approval of the loan.

3. Maximum Loan Amount Offered:

The requirement of a personal loan could range from a few thousand or lakhs depending upon the need of the individual. However, not all lenders might lend for the amount that you require. Therefore, it is important to check for the maximum amount of loan offered by a lender. 

Generally, banks and non-banking financial institutions grant loans of up to Rs 25 lakhs, however, online lenders restrict the amount to anywhere between Rs 25000 to Rs 500000.

Here, it is also important to check for the maximum tenure of the loan allowed on personal loans by that lender against the amount of loan offered. Short tenured loans would create a heavier EMI burden on your pocket.

4. Compare Interest Rates:

Interest Rate is one of the important determinants when choosing the right loan. Ideally, the lender with the lowest rate of interest would be preferable. However, a lender cannot be chosen just based on interest rates as other factors also matter.

To do this you might want to check interest rates of a variety of lenders like banks, non-banking financial institutions, and online fintech lenders.  Each one of them offers a slightly different structure of interest rates depending on their internal policies and cost of funds.

While banks might have a slightly lower rate of interest, their requirement of credit score is on the higher end, generally above 750. 

5. Check for Other Hidden Charges:

A personal loan comes with other associated charges like Processing Fees, Part /Pre-Payment Penalty, etc. It is worthwhile to pay attention to these charges as they increase the total cost of your loan. Again, as with the interest rates, personal loan associated charges and fees will have to be compared in conjunction with the other terms and conditions.

A percentage lesser on the processing fee might not matter much if the interest differential between two loan offers is too high.  Also choosing a lender without prepayment penalties like Money View might be useful if you make a choice to pay off the loan before the completion of the tenure.

6. Look for Ease in Availing the Loan:

When you need a loan, you would want to avail of a loan in the easiest possible way. Banks and other financial institutions need submissions of hard copies of the documents, loan application and sometimes, a few trips to the bank before your loan is approved and disbursed. 

In comparison, online lenders offer an entirely digital process where you can, not only apply for a loan online from your smartphone or on their websites, the entire process until disbursal happens online. This saves you precious effort and time and ensures you can avail of a loan comfortably. 

So, while going in for a personal loan, it is difficult to choose the right one based on just one or two factors, it is advisable to consider all the above-mentioned factors before submitting your application for a personal loan.

Author Bio: Surya Patra is a qualified Search Engine Marketing Specialist with more than 4 years of experience in the financial domain & is currently working with "https://moneyview.in/" (Private finance Company).