05 JUNE, 2020

Over the years, personal loans have become widely-used and are being offered by leading financial institutions. This aspect is not surprising, considering the several benefits and features it carries. It can help you improve your current lifestyle and also bail you out in times of financial emergencies. Versatility in usage stands at the core of a personal loan. From paying for your home-renovation, much-coveted vacation, medical emergencies to wedding costs, it can truly serve you well.

While getting a personal loan is simple and convenient, you must also make sure that you obtain it from a viable lender. You must evaluate several aspects before making the right choice. Read on to know the different factors that you should consider when picking a personal loan lender:

Compare the rate of interest on the loan – The rate of interest that you go on to pay on your personal loan will majorly affect your budget. Financial institutions or banks charge different personal loan interest rates and thus, you must consider the same very closely. The interest rate is also affected by your credit score. While you do pick a low rate of interest, you must note that it is not the only factor that should drive your decision. Often, an institution that offers a higher rate of interest may render you with other benefits that bring much greater value.
Follow the fine print – A lot of offers may seem extremely lucrative, however, you must consider the fine print. The terms and conditions as part of a personal loan are dictated in the legal document. Ensure that you thoroughly read and understand all the terms stated and are clear about your obligation. In the case of any doubts or confusion, have it clarified by the lender to avoid future discrepancies.
Note the processing charges – As with every kind of loan, a personal loan also includes processing fees. Typically, the lender charges a small percentage of your total loan amount as processing fees. When choosing a lender, be sure to review the processing costs. Additionally, you must also ascertain other associated fees that may be applicable.
Assess the penalties and prepayment costs – Over time, you may be in a position to make prepayments and close your personal account quicker than the stated tenure. This proves to be a prudent move and can help you save on the interest cost. For this reason, you must be aware of the rules laid down by the lender. Sometimes, they can be stringent and you may end up paying up more than you save. Enquire about the costs to avoid paying hefty charges in the future.