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Whether it’s a vacation, a home remodelling project, a wedding, or an emergency, a personal loan can help you meet the need of the hour in the fastest way possible. Thanks to new-age digital lending solutions, today, taking a personal loan is easier than ever. These services are extended to people, who are usually unserved/underserved by the traditional loan providers, and the entire loan approval process, including underwriting, risk assessment, disbursal, and repayment model is digitalized to ensure a seamless customer experience.
Digital lending platforms leverage the power of advanced technology such as AI and Data Science, to provide customized personal loans to people across the credit spectrum. They require minimal documentation and the loan is approved almost instantly. While taking a loan from a digital lender to meet your pressing financial needs is a quick and hassle-free process, choosing the right lender is very essential.
Here are some ways that can help you choose the best loan provider:
Choose the right loan product
There are a thousand lenders in the market who have several loan products to offer that continue to grow with each passing day. If the need is immediate and has a sense of urgency tied to it, a personal loan that takes longer to get approved might not be a feasible choice. A borrower should first evaluate and pick the right product to fund their need. While personal loan needs collaterals, there are other Lines of Credit products that require no collateral, offer instant loan disbursals and provide flexible repayment options
Compare loan interest rates
Once you figure out how much money you need to fund a certain need, check the interest rate charged by the lender. The lower the interest rate, the lower would be the EMIs. Small percentage differences may seem trivial, but they can make your loan much costlier in the long run. Therefore, before applying for a loan, it is a must to compare the interest rates charged by different lenders.
Understand the fine print
Every lender will present you with an official document dictating the terms and conditions of your personal loan. The contract is legally binding and it’s important to ensure that you’re aware of and agree to each of the terms and conditions. If you have any doubts, ask your lender for clarifications before making the move.
Look for hidden charges
Apart from the interest rate, it’s also important to know the fees and charges you’re liable to pay for taking a personal loan. These include a processing fee, which is deducted from the amount you receive. There are other charges too such as late payment fees or cheque bounce charges, during the loan tenure. Hence, it is essential to check both the interest rates and fees charged by different lenders to determine the affordability of their offers.
Pre-payment charges and penalties
It’s wise to make pre-payments towards your loan whenever you have extra disposable income available to you. It lowers the cost of your loan as interest is accrued for a shorter period. However, few lenders levy hefty charges on prepayments. So, it’s important to know if there are any pre-payment charges or penalties before you avail of a loan. It’s best to go for those loan providers who are flexible when it comes to loan repayments and make sure that they don’t impose the burden of prepayment penalties on you.
by, Anil Pinapala, Founder and CEO, Vivifi India Finance
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