PERSONAL LOAN - FACTORS TO CONSIDER IN PERSONAL LOAN OPTION

Before you opted for personal loan to get over from your financial needs, you must consider some factors to avail it.

Here are some of the important parameters that any borrower should assess before signing on personal loan

Read also: How to avail personal loan

Personal Loan Interest Rate:

When you take a Personal Loan, the interest outgo is one of the vital deciding factors.

The interest rate you pay depends on a variety of factors: your age, income stability, whether salaried or self-employed, number of years of work experience (in the current job/business/profession) and total), your credit score, existing EMIs (if any), and your repayment capacity, loan tenure, among other things.

The interest outgo determines your EMI and has a bearing on your budget and long-term financial well being. So, make sure you apply for best personal loan rates.

It makes sense to compare personal loan interest rates across lenders and opt for a lowest interest personal loan.

Loan Providers	Personal Loan Interest Rates
State Bank of India	12.50% - 16.60%
ICICI Bank	11.59% - 18.49%
Axis Bank Limited	15.50% - 24.00%
Bajaj Finserv	11.99% - 15.50%
Tata Capital	11.99% - 19.50%
UCO Bank	11.20% - 11.45%
HDFC Bank	11.49% - 19.8%
Andhra Bank	13.05% - 14.30%
Punjab National Bank	10.95% - 14.70%
IIFL	13.50% - 18.00%

(Please note this list is illustrative and not exhaustive)

Loan Tenure:

The maximum tenure for a Personal Loan is usually 5 years. But the shorter the tenure of a Personal Loan, the better it is.

Loan amount (Rs)	Interest rate	Term of the loan (years)	EMI (Rs) (rounded off)	Total cash outflow (Rs)
15,00,000	15%	1	1,35,387	16,24,644
		2	72,730	17,45,520
		3	51,998	18,71,928
		4	41,746	20,03,808
		5	35,685	21,41,100

Processing Fee & Other ChargesA higher tenure can reduce your EMIs, making repayments comfortable, while opting for a lower tenure (of say 2 to 3 years) increases your EMI; you pay a higher interest cost on the Personal Loan.

Taking a Personal Loan does not end with interest rates; there are processing fees and other charges levied by lenders.

The processing fee is a one-time fee charged as a certain per cent of the Personal Loan amount, but subject to a minimum amount. It varies from lender to lender.

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A higher processing fee impacts your total cash outflow while you apply for a Personal Loan.

The other charges include: stamp duty, late payment fee, cheque bounce charges, duplicate interest certificate issuance charge, duplicate statement issuance charge, duplicate amortization schedule charge, issuance charge for photocopy of loan agreement/documents, prepayment charges (also known as foreclosure charges) and so on, all of which these should be examined carefully.

Repayment Flexibility:

Apart from the above crucial aspects, assess if the lender provides you with the flexibility to repay your loan sooner, and what will this cost you.

This flexibility can help you prepay the loan ahead of time, as well as provide a relief in distressing times.

However, it's best to adopt financial discipline in order to repay the Personal Loan on time and maintain your financial health in the pink always.

Customer Service:

When you avail a Personal Loan in times of need, you wouldn't want it to be an unpleasant experience, do you?

Hence, ensure the customer service at the lender has high standards. This service can even help keep track of your loan, allow you to be in better control of your personal finances.

Remember, while lenders will have varying customer service standards, there are some basics of good service that are universal.

Salary:

A salary highlights the repaying capacity of the borrower. A lender requests a borrower to furnish the latest salary slips.

A salary is considered adequate based on the loan applied for, expenses, outstanding loans (if any), and the city of residence, etc.

The Office / Company You Work At:

Almost all Indian banks categorize employers based on size and popularity of the company.

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If your employer falls under the highest category, you may be eligible for a higher loan amount at a lower rate of interest and vice versa.

Job Term:

Banks and other lenders may analyse the time period you have been working at the current job and even the number of years of work experience.

A higher time span in your present job may work in your favour while procuring a loan.

Lenders may also visit your employer to verify your details.

Your Current Economic Life Cycle:

A bank may not be hesitant in granting you a loan if you are settled and future prospects of earnings are bright, plus if you are residing in your current house for long.

Terms & Conditions:

Make sure you read the terms &condition carefully to make an informed choice. This will avoid issues later and ensure a pleasant, hassle-free experience.

These 10 factors play a crucial role in finalizing a Personal Loan. As highlighted above a personal loan charges a high interest rate. It should be opted only as a last resort.

So take your decision with more cautious. please share and comment below with your suggestions / queries.