How to Shortlist the Best Personal Loan Lender in India? A Must Checklist
Choosing a Personal Loan is a big financial commitment, and you need to be careful about the many aspects related to the lender and lender’s credit policy. Most people look for the lowest interest rates and most flexible eligibility criteria. Not many people, however, know about assessing the health of the bank or lender.
Selecting the best lender is an essential part of borrowing. You will be working with the lender for the entire duration of the loan. If you do not choose the right lender, you might end up with “hassles” that may hurt you for the entire duration of the loan and may be even after it.
So, let us look at some considerations with regard to choosing the right lender for taking Personal Loans.
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Lender’s regulatory authorisations:
As per the law, not every firm that deals with money-related matters is authorised to lend money. Only Banks and Financial Services Companies are authorised by the Reserve Bank of India for lending business. It is best to take Personal Loans from RBI authorised organisations only.
This is easily the most important point in lender selection. You need to see if the lender offers the exact type of loan product you need. Unlike common perception, there are a number of different types of Personal Loans. The Best Personal Loan for you is the one that caters to your end use of loan amount. ICICI bank offers Personal Loans for wedding, holiday, home renovation, top-up over current Personal Loan, and fresher funding for people with no credit history. The detailed terms and conditions of each of these personal loans differ, and you can choose the one specifically for your needs.
Loan product interest and charges:
Check online for Personal Loan eligibility, interest, and processing charges. You should choose a lender who is willing to offer you the lowest interest rates and processing fee. Calculate the total outgo from your pocket to service the debt. In many cases, you will see that the lender will charge a higher processing fee, but the interest rate will be lower. In most of the cases, you will find that lenders will offer both, low interest rate and low processing fee. This is the best choice but always prioritise lower Personal Loan Interest Rates over lower processing fees. Also consider which lender offers you maximum flexibility in repayment duration.
Lender product processing history:
The processing history of lender should be one of the key considerations in choosing best Personal Loan provider. Always check on internet and read reviews & experience stories from people who have borrowed from different banks, NBFCs, and instant Personal Loan companies. Check how long did the lender take to process the application and disburse the amount. Check for what documents were submitted at the time of application and if any other documents were asked for by the processing department later on during the processing time.
Lender EMI payment options:
Not many lenders provide a wide range of repayment options. In fact, a number of lenders tend to ask for manual repayment of loans. Here you have to pay your EMI in the form of cash or cheque deposits in the lender office. You must choose a lender who will provide you multiple methods in which you can make EMI payments. At the very least, the lender should be ready to accept an automatic EMI payment from your bank account. Ask the lender to set up the standing instruction on the bank account. If not, they must allow you to set up automatic EMI payments from your account.
Lender pre-payment and post payment services:
Pre-payment is the only way in which you can pay off your loan amount before the loan tenure. It will save your money that you would have otherwise paid in EMIs. However, a number of lenders tend to impose lock-in period where you cannot pre-pay a loan before a set period of time, generally before first year. Stay away from these lenders!
Also check how much prepayment charge will be levied by the lender. Commonly this is 3% to 4% on the remaining principal amount. Avoid lenders who charge more. Post payment services are the services related to loan that are availed once the loan is fully paid off. This includes but is not limited to issue of NOC and credit bureau reporting. Do read good number of reviews before choosing a lender.
Lender customer support options:
Customer support options are an often-ignored factor when people are choosing loans. This will lead to a lot of friction if you experience any problems or queries related to your loan. A number of Instant Loan companies only provide email-based or app-based chat for customer support options. They do not have branches and a wide network of offices like traditional lending institutions. Banks and NBFCs on the other hand will provide you multiple customer support options. You can reach them through phone, email, through their branches, and they also provide you physical mail and courier addresses through which you can contact them. Check all customer support options available with lender before signing on the dotted line.
Lender policies on missed EMIs:
If in case you are not able to pay your EMIs on time, you will be charged some extra fee and interest. Check with the lender about what are their policies with regards to missed EMIs before you choose the Personal Loan. Many lenders will excuse a missed EMI, provided you pay within a few days of when EMI was due. Lender will call you on phone to let you know that you have missed an EMI and they are giving an option to pay it urgently. In case of multiple missed EMIs, the lender may start imposing extra interest and penalties. Check beforehand to find out what those penalties may be.
Lender policies on delinquent loan recovery:
No lender wants a delinquent loan. Generally, a loan on which the lender has not received EMI for a period of 90 to 120 days will be considered as a delinquent loan. Check with the lender about when they consider a debt delinquent and what are their recovery protocols. How much and by when will they offer the settlement options for a loan that has not been performing properly. When and if they will dispose of it to loan recovery companies and how and when will they report these non-performing loans to credit reporting companies like CIBIL etc.
In all, you must be as careful with choosing the loan provider as you are with choosing the loan.
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