Interest rate is often times considered as a prime factor to compare Personal Loans by the borrowers. Wherein, it can be highly misleading to compare two Personal Loan offers from different lenders on the basis of interest rate only. For, the two offers may vary significant on other parameters.
Whenever we go shopping, we compare price as well as product to choose the best offer. Even on top ecommerce websites like Amazon you will find similar products being marketed at different price. You choose the best offer with minimum delivery charge. I am sure: you also try to compare similar brand products for better rates.
That’s acceptable consumer behaviour across the globe. Marketing strategies are designed to accommodate consumer needs for best value.
Likewise, before Applying for Personal Loan, it is important to compare and review the available Personal Loan options. Personal loan in India are readily available from a host of lenders, including & not limited to banks, NBFCs and app based fintech lenders. While comparing the deals it is important that you compare apples with apples. A bank loan offer and a short cash loan will not make the perfect comparison.
Let’s delineate methodical steps to compare Personal Loans for different purposes.
Personal Loans can be used for multiple purposes, there are no lender-specific restrictions attached. You can precisely use these loans for anything such as lifestyle purchases, buying furniture & fixtures, paying out college fee, or travel.
To effectively compare the loan offers, it is important to note down why you need the loan. This will help you:
a) Channelize the loan amount for the right purpose.
b) Choose the right type of lender for your needs.
Personal loan availability is dependent on how you meet the eligibility criteria of the lender. You can basically borrow a secured loan or an unsecured loan for your requirement. The other loan terms will vary on the basis of the type of loan you have chosen. For instance, rate of interest is higher for unsecured loans as compared to secured loans. But you pledge an asset to acquire a secured loan and own the risk of losing it in case of a default. No such risk is involved in case of unsecured loan though.
Thus based on your cash flows for servicing EMIs, needs, and risk appetite you should make a list of suitable lenders.
A Personal Loan can be borrowed from a bank, NBFC, financial institution or an online lender. There are pros and cons of choosing each option. Thus it is best to make a comparison between their offers before choosing the lender.
Herein, I have outlined difference between Personal Loan offers from Banks, NBFCs and Fintech Lenders. You can choose the best match according to your requirements.
Ideally these loans should be availed for very short term Instant Loan requirements. The rate of interest can range from 1.5% – 3% per month.
Now as you know your requirements, financial health and the types of available offers in the market, you can choose the suitable lenders for your needs.
Contact a loan comparison website and ask for the Personal Loan Interest Rates as per your budget. Try to get four to five quotes and narrow down options comparing other factors such as loan processing, penal charges, foreclosure clause besides interest rate.
It is important to ensure that while you enquire for interest rate, you ensure that the bank is not making a hard enquiry. You can compare the deals, basis the informal soft enquiry. A hard check should be raised for the lender you finally choose only.
It is worth reiterating here that you do not compare a bank loan with an online lender’s offer. Precisely because, there is a significant difference between the credit policies of these lenders.
For example- Let’s say, you want to avail of Rs 50000 to Rs 2 Lakh urgently for a very short term, i.e. up to 3 months. You have all the back up to repay this loan. Here, an online loan will be your go-to option. You can get the funds within a few minutes and there will be no foreclosure charges as you repay the loan. In many cases you may even get a balloon payment option and you may need to pay EMI at all. The final decision will be the lender’s and may vary as per your profile.
However if you opt for a bank’s Personal Loan, it may take 1-2 days to process the application. For, banks’ have higher compliance regulations to meet. Besides, a bank will offer your Personal Loan as a Term Loan wherein you are required to service EMIs for longer period. A prepayment will incidentally invite a penal charge.
Thus, ensure that you are comparing apples with apples. Compare loan quotes for: loan amount, loan duration, Interest rate, Annual percentage rate (APR), EMI, processing fee, foreclosure charge, other fees, late payment charge, etc. It is important to read the terms and conditions before signing the loan agreement.
Lastly, it may always be fruitful to negotiate for more value from the deal. You may ask for better rate of interest, discount on processing fee and more flexible loan terms. Particularly when you have a good history, a lender will be more than willing to offer your better loan terms to secure a quality prospect as a client.
Thus, use your customer right and ask for the best deal. Following these steps, you will surely find the best deal, as close as to a customised offer, tailored for your needs.
Also Read: How to Get Instant Loan on Aadhaar Card?
To apply online for Home Loan, Personal Loan, Credit Card, Business Loan & LAP visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 100+ Banks and NBFCs. We have served 7 million+ happy customers since 1989.