Taking a personal loan can be useful to meet short-term cash needs or finance major expenses. With the growth of online lending in India, you can now compare and apply for personal loans from the comfort of your home. However, the availability of many loan options can also make it challenging to identify the right loan product. Read on to learn the tips for choosing a personal loan online in India.
Ways to Choose a Personal Loan Online
Here are the ways you need to follow for choosing online personal loan:
1. Understand Your Loan Requirements
The first step is to evaluate why you need funds and determine the loan amount. Make sure to factor in all major expenses to arrive at the figure. Also, assess how soon you need the money and by when you can start the EMI repayment. This will help shortlist loans that meet your funding needs.
2. Check the Interest Rates Carefully
Interest rates vary widely across lenders. Compare the advertised rates along with any processing fees or hidden charges. Opting for a loan option with higher interest costs can mean paying thousands extra over the loan tenure. Always double check the terms to avoid any surprises later.
3. Review the Processing Fees and Other Charges
Many lenders levy a one-time processing charge on disbursal along with other fees. Compare the all-inclusive costs across potential lenders instead of just the interest rate. Choosing a loan with lower processing fees can lead to significant savings.
4. Evaluate the Eligibility Criteria
Online lenders have specific eligibility norms related to applicant age, employment, credit score, and income. Review the criteria for different products to check if you qualify. Expanding your options to include loans from new-age fintech firms or peer-to-peer platforms may improve approval odds.
5. Look for Flexible Repayment Options
Opt for loans that offer flexible tenure options to suit your repayment capability. Many products now allow part-prepayments or accelerated repayment to reduce interest outgo. The option to pay only interest initially helps ease liquidity pressures temporarily.
6. Assess the Speed of Approval and Disbursal
Faster processing can ensure you get the funds when you need them. Digital lenders often promise quicker loan approval and disbursal through seamless online processes. However, make sure you still evaluate other parameters instead of choosing loans only on the speed promise.
7. Check the Lender’s Reputation and Customer Reviews
Before applying, it is vital to check online customer reviews and industry feedback for shortlisted lenders. Opting for established banks and reputed online lenders reduces repayment default risks if you face temporary cash crunches later.
8. Understand the Documentation Requirements
Digital lenders often have simpler eligibility criteria and documentation needs. However, make sure you go through the documents needed to avoid last-minute delays. Opportunities to upload scanned copies online also make compliance easier nowadays.
9. Compare Multiple Loan Offers
Before deciding, initially, shortlist a few potential loans that meet your needs before making the final choice. Comparing across products on parameters like rates, fees, and flexible options ensures you get the best deal. Online tools also allow you to compare personal loans in one place.
10. Use Loan Calculators to Estimate Your Payments
Most lenders allow you to calculate personalised EMIs and repayment costs. Use such loan EMI calculators to accurately assess cash flows and obligations before accepting the loan. Accounting for taxes and processing fees will present the true picture.
11. Understand the Impact of Your Credit Score on Loan Terms
Higher credit scores make lenders view you as a reliable borrower, improving the loan amount and interest rates offered. If your score is low, improve it over 3-6 months before reapplying for better loan terms.
12. Beware of Hidden Charges and Fine Print
Carefully read all terms to check for clauses related to foreclosure fines, processing fees, prepayment penalties, and increased rates after default. Such hidden charges and caveats in the fine print can worsen repayment costs.
13. Know Your Rights as a Borrower
As per RBI rules, lenders cannot levy prepayment charges after a set number of EMIs and cannot penalise late repayments with interest exceeding 2 percent. Know such regulations before applying for any loan product.
14. Check the Lender’s Reputation and Reviews
It is vital to evaluate feedback, complaints, and industry perceptions about shortlisted lenders before applying. This lowers repayment default risks in case you face temporary cash crunches later.
15. Understand Documentation Needs
Digital lending platforms promise easy eligibility norms, income proofs, and KYC documentation. However, run through the documents required to avoid last-minute delays due to new demands.
16. Use Online EMI Calculators
Many lenders have tools to calculate personalised EMIs by factoring in interest, fees, taxes, and tenure. Use such real-cost calculators to evaluate accurate repayment capability before accepting any loan.
17. Understand Tax Benefits, if Any
Some loan offerings have tax benefits on the interest paid under Section 80C. Factor this in when comparing costs across loan offerings.
18. Check for Special Offers and Discounts
Many digital lending platforms provide limited-period discounts or processing fee waivers. Opting for such provides can lead to significant savings on your overall outlay.
The Bottom Line
Choosing a suitable personal loan from the comfort of your home is now easier than ever. By clearly determining your capital needs, comparing costs and charges, checking regulatory protections, and leverage seasonal offers, you can identify affordable and customised personal loan products online. Avoid choosing only speed or brand appeal rather spend time evaluating the above parameters for the right fit.
