If you are reading this, you are most probably looking for a personal loan. Is it a wedding or are you travelling or if there is a medical emergency or is your child planning to study further? Whatever your reason is, a personal loan is the easiest way to raise funds and quickly fulfill all your future plans. Here are a few tips for choosing the right personal loan:
- Compare interest rates: The first thing that should be considered at the time of taking a personal loan is the interest rate. Lower the interest rate offered by the bank, lower would be the EMIs. Therefore, instead of visiting the official websites of different lenders to check the interest rate offered by them, visit Paisabazaar.com and compare interest rates by various lenders at a single platform.
- Flat Interest Rate vs. Reducing Balance Rate: Some lenders might offer you the choice between flat interest rate and reducing balance rate. In case of a flat interest rate, interest is calculated based on the loan principal for the entire tenure and all your EMIs will be exactly the same. Alternately, in case of the reducing balance rate method, interest pay out (hence EMI) reduces over the loan tenure as the loan principal is repaid. Make sure you calculate which option features a lower interest pay out before making your choice.
- Compare fees and charges: Apart from the interest rates, it is also important to compare the fees and charges associated with a personal loan. These fees and charges include processing fee, late payment fee, prepayment fee, part-pre payment fee, cheque bounce charges, etc. Some banks offer limited offers on these fees and charges and you might get a really good deal when you start comparing
- Know your EMIs: Before you apply for a particular personal loan amount, you should be sure if you will be able to repay the loan on time. Therefore, you need to have an estimate of the EMIs that you could easily know by using Paisabazaar’s Personal Loan EMI Calculator. By just entering the respective loan amount, tenure and interest rate, you will get an estimate of your EMIs and hence would not only be able to borrow as per your repayment capacity but would also be able to plan your other monthly expenses accordingly
- Read the Fine Print Carefully: It is important to read the offer documents very carefully and to completely understand all the terms and conditions regarding your personal loan. If you have any doubts, clear them immediately with your lender. Do ask for details like:
- What happens if you fail to pay EMI on time?
- Can existing bank account be used to receive funds?
- Is foreclosing the loan a possibility?
- Are partial prepayments possible?
- Will the monthly EMI be automatically deducted from your account?
Taking up a personal loan to fulfill your dreams is a smart decision but only after understanding the terms and conditions and your affordability. Yes, you need money in the present but that doesn’t mean that your future deserves an unnecessary burden of heavy EMIs so it always better to choose wisely.