Borrowers today can get a personal loan via their phone without having to step out of the comfort of the home.
Both 2020 and 2021 have been terrible for the economy. The outbreak of the coronavirus and the lockdown that followed severely affected livelihoods. With everything shut, people faced trouble to meet their expenses and had to resort to borrowing money. And while credit cards are an easy option, personal loans are still preferred over because they are the cheapest and are available at interest rates as low as 10.25 per cent. If you are someone facing a sudden demand for cash, personal loans can be your go-to option.
It is important to conduct research and look at all the available options before locking on a particular personal loan. Here are things that should be kept in mind.
Lenders
Borrowers today can get a personal loan via their phone without having to step out of the comfort of the home. The market is flooded with options and this leads to confusion. It’s advisable to do thorough research and an online aggregator platform can come in handy making sure you don’t miss out on deals. If you are looking for a long term loan, banks could be ideal. For a shorter period, fintech options can also be explored.
Interest rate
Many lenders attract customers with marginally low flat interest rates. However, in such cases, you end up paying more interest from the pocket. It is always advisable to get a loan option where the interest is calculated on the reducing balance method.
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Other Charges
Before finalising any loan option, you need to understand the extra charge involved in the personal loan disbursal. It is customary for lenders to charge a 1-2 per cent processing fee in case of personal loans. Some lenders even charge an administrative charge that is non refundable. Thus, it is advisable to compare the cost of the loans while keeping these charges in mind.
EMI calculations
It is important to be accustomed to financial jargon and understand the process of EMI calculation. This will ensure you don’t end up paying more than you should have. For example, no-cost EMI has been a buzzword in the era of online shopping but is it really no cost? In most cases, you are charged a processing fee that technically doesn’t make it a no-cost EMI.
Even in the case of advanced EMI, you end up paying a lot more than you should have. If you pay 2 EMIs upfront, you technically are paying a higher interest rate than you actually agreed on.
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Prepayment Charges
Banks and lenders charge foreclosure and prepayment charges in case the borrower wants to settle their loan before the loan tenure. So, in case you have any plans to settle the loan early, you should compare these charges and go for the lender who is offering maximum flexibility on repayments, partial or total.
Credit Score
In deciding what interest rate or loan options you will get, credit score plays a very important part. A credit score above 800 will ensure you are eligible for lower interest rates.
