If you are all set to borrow a personal loan, then the first and foremost thing that you need to do is to zero in on a bank to borrow the money from. Amid a flurry of borrowing options to go around, one can opt for an NBFC (non banking financial corporation) or a fintech lending app as well.
It is recommended that you choose the best personal loan provider after examining your financial needs, carrying out a thorough research, and comparing different lenders and their interest rates.
Here are some of the important factors to consider.
Key points to remember
1. Evaluate your needs: First you should determine how much you need to borrow. Then identify if the loan will be used for some specific need (such as for a wedding or loan consolidation).
Importantly, you should consider your ability to repay the loan comfortably based on your income and existing obligations.
2. Interest rates and APR: Check the interest rates charged by different lenders. Besides, compare the APR instead of just interest rates, since APR includes fees and gives a clearer picture of the cost of loan.
3. Check Fees and Charges: Some lenders charge a percentage of the loan amount for processing upto a maximum threshold.
At the same time, you should avoid the lenders who charge penalties for prepayment of loan. Understand the penalties for missed or delayed payments.
4. Terms of repayment: Shorter terms usually have higher monthly payments but lower total interest. Longer terms reduce monthly payments but increase total interest.
5. Flexibility: Look for lenders that offer flexible repayment terms or allow changes if your financial situation changes.
6. Whether you are eligible: Check the lender's minimum credit score requirements:
A. Ensure your income meets the lender's criteria.
B. Many lenders prefer a DTI below 40-50 percent (debt to income)
7. Check online reviews: Opt for lenders with a simple and quick application process. You should make sure that the bank has responsive customer service.
8. Reputation of bank: You are advised to look for reviews on platforms such as Reddit. At the same time, avoid the lenders with hidden fees or unclear terms.
If you are planning to borrow from an NBFC or fintech lending app, make sure that it is approved.