A lot has been said and written about personal loans which is not at all surprising considering how popular this product is. The versatility of personal loans combined with easy availability and quick disbursement makes this one of the most availed financial products in the market today. But how to choose the right personal loan?

Applicants today are bombarded with personal loans with different features and benefits and this can result in confusion. Which personal loan should you choose? What factors should be considered before choosing the right loan? In order to provide more clarity and help you choose the right personal loan, we have curated 5 tips to help you select the right personal loan for you. Take a look below.

5 Tips to Select the Best Personal Loan

While there are multiple personal loans available in the market today, not every option will be right for you. Therefore, firstly you need to keep in mind the purpose of availing the loan. Are you looking for emergency financial assistance? Do you want to pay off another loan? Or do you want to just increase your credit score? Once you have decided the reason for availing a personal loan, follow the steps given below to choose the perfect personal loan.

Repayment Ability

Before availing a loan it is essential to figure out your finances in terms of the amount you wish to avail, the amount you will be able to pay including interest as well as the time required for this. Availing an exorbitant loan without having a provision to pay for it is foolhardy as it can detrimentally affect your credit score.

Interest Rate

The interest rate charged will largely determine your EMI and is based on your credit score, loan amount availed, etc.
Usually unsecured loans such as personal loans, i.e., loans that do not need a collateral may have interest rates that are on the higher side. Therefore keep your financial state and repayment ability in mind while looking for personal loans. Higher the interest rate, higher is the EMI.

Fees and Charges

The fees and charges vary for every loan. While most charge a processing fee, other charges such as late payment penalty, cheque bounce charges, prepayment penalty etc. may be charged if relevant. Please note that while availing a loan you must do so only if you are sure that you will be able to repay the same so as to avoid penalties.

Tenure flexibility

Your repayment tenure is another factor that determines your EMI. Longer the repayment term, lower is the EMI. However, the overall amount of interest you pay also increases. Selecting an option that is beneficial to your financial situation is necessary. Most personal loans come with repayment terms that vary from a few months to 5 years.

Loan amount

Finally, the loan amount you have chosen to avail is also a factor that determines the EMI. Every lender will have varying rates of interest as well as other charges. Therefore, if you wish to avail a higher loan amount look around for lenders who offer competitive rates of interest and do not have hidden charges. If not, you may have to go for a lower amount than what you require.

Once you have figured out the loan amount to be availed, repayment term, and interest rate, use an EMI calculator to find out how much EMI you may be expected to pay and plan your finances accordingly.

Bonus Tips

Eligibility
Did you know that the eligibility criteria for each lender varies and is not standard across the country? While some provide loans only to those who have credit scores of 750 and above, others like Money View use their own unique algorithm to determine eligibility. This enables even those with relatively lower credit scores to avail loans. Ensure that you compare the eligibility criteria of at least two or three lenders and choose one that suits your financial situation the best.

Check the Fine Print
While most trustworthy lenders do not impose hidden charges, it is better to always be safe rather than sorry. If you have decided on a lender, check their loan agreement carefully to ensure that there are no unpleasant surprises later.

In Conclusion

Customers today are lucky as they have a plethora of lenders to choose personal loans from. However, too many choices can also lead to confusion. Ensure that you use the points given above while comparing multiple options to help you select a personal loan that is perfect for your requirements.