6 Easy Ways to Choose the Best Personal Loan in 2022
05 Apr 2022
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A personal loan is an unsecured type of a loan, which means that you do not provide collateral to secure the debt. Personal loans can be procured for a maximum amount of Rs. 25 lakhs. These types of loans are one of the best ways to finance personal goals, pay for vacations, afford dream weddings, or overcome periods of financial problems. Furthermore, you can even procure a personal loan to consolidate your debts and make your EMI payments easier to manage. Out of the many loan options available in the market today, a personal loan usually requires the least amount of paperwork. These loans are also quick to get processed and disbursed by the creditor.
There are multiple personal loan providers present in the market today; thus, you get a plethora of personal loans options to choose from. However, it is important to ensure that you get the best personal loan for yourself by choosing the right creditor. This will ensure that you can clear off your debt easily without taking on any unnecessary stress.
To help you meet your financial requirements with ease, here are 6 tips on how to choose the best personal loan-
1. Check and compare interest rates
The interest is the cost of borrowing money from the lender. Different loan providers charge you different rates of interest. When applying for a personal loan, it is important that you make a good decision by choosing a bank with lowest interest rate for personal loan borrowers. This way, you can reduce the overall amount that you will need to repay the lender. Do note that banks may charge different interest rates for their existing customers. So, if you already have a good relationship with a bank, you may want to apply for your loan with them instead of going to an entirely new lender. Sometimes, banks offer lower rates of interest to employees of well-reputed companies. They may also run deals on personal loans and other types of loans during the festive season. Do look into all these possible deals before taking a personal loan.
2. Check the eligibility criteria
Lenders place certain requirements that you need to fulfil to be eligible for a personal loan. Before applying for a loan, make sure to check the eligibility requirements of different lenders. This kind of research will help you choose a lender whose eligibility criteria are simple.
The best banks for personal loans have the simplest eligibility criteria; hence, making it easy for masses to avail personal loans. Bank of Baroda too has easy eligibility, so that you get your financing without much hassle.
3. Understand the documentation process
The documents required by the lender help them verify your identity and gain confidence on your ability to repay the loan. The documents usually required by lenders for granting you a personal loan are -
- Proof of your identity like your Aadhaar card, passport or driving license
- Proof of address like driving license, utilities bill or a valid Indian passport
- Proof of income like salary slips, ITRs, or bank account statements.
- If you are self-employed, you need to prove to the lender that you have a regular source of income. You can do this by providing the lenders with the registration certificate of your business or by providing them with a balance sheet and the profit and loss account of income in the past 1 year.
The documents required for the approval of your loan can vary from one creditor to the other. Hence, it is better to check the documents required by the lender before beginning your application process. You can check the list of required documents either on the lender’s website or by simply searching for the list on the internet. Choose a lender who requires minimal documentation so that the application process eases out for you.
4. Choose a lender who provides you the required loan amount
A higher loan amount generally requires you to have a proportionally high CIBIL score. Thus, ask your lender if your current CIBIL score is enough to get you the loan amount you require. The loan amount that gets approved also depends on your monthly salary or income. Lenders usually allow you to procure a loan that is ten times your monthly income. For example, if your monthly salary is Rs. 25,000 and you have a CIBIL score of 750, you can easily avail of a loan of maximum Rs.25,00,000. It is important to check whether you qualify for the loan amount you want or else your application will get rejected and you will have wasted precious time.
Before applying for the loan, do figure out the EMI amount you need to pay on the monthly basis. You can easily do this by using an online personal loan EMI calculator. Do not let your monthly EMI payments exceed 50% of your gross monthly income.
5. Pick the right loan tenure
A personal loan can usually be taken for a tenure that lasts up to five years. However, a few lenders even allow you to procure a personal loan for up to seven years.
An extended loan tenure helps you reduce your monthly EMI payments; however, it increases your total interest pay-out. A shorter loan tenure, on the other hand, helps you get debt-free swiftly, but also increases your monthly EMI payment amount. You can use an online EMI calculator to select the right tenure that fits in your budget.
It is important to remember that the loan tenure is the maximum time you are given to repay the debt. If you pay back the debt before the loan tenure is over, you might be charged penalties for the same. Make sure to ask your lender whether they charge any kind of prepayment penalties on their personal loans.
6. Compare the fees and charges of procuring a loan
While deciding which loan is best for you, do also check the processing fees, past due payment penalty, loan cancellation charges and other such penalties and charges that are imposed by the lender. These ancillary charges can add heavily to the total expense of procuring a loan and if these charges are high, your cost of procuring a loan goes up significantly.
The processing fee is another major expense that you need to be aware of. Processing fees are typically charged between 1% to 3% of the total loan amounts. For example, if you need a loan for Rs.5,00,000 and the processing fee charged is 2% with an interest rate of 10.5%; your total cost of procuring the loan would be Rs. 62,500, wherein, Rs.52,500 would be your interest pay-out and Rs.10,000 would be your processing fee.
Many lenders waive the processing fees under exceptional circumstances, such as the festive season. These times are regarded as the best times of the year to procure a loan as you usually get the lowest personal loan rates and the best deals.
Personal loans are one of the easiest loans to procure. Since these loans do not require you to pledge any collateral, you can easily get funding even if you do not have any valuables or assets to pledge as security. Due to this personal loan benefits, it is one of the most popular forms of loans taken in India.
There are a lot of lenders present in the market today providing personal loans. As a result, it is quite important that you choose the best bank for personal loan in India for your needs.
Bank of Baroda has some of the best personal loan offers available today. With minimal documentation and affordable interest rates, getting a loan to finance your dreams has never been this easy. Whether you want a loan to pay for a sudden expense or for a surprise gift for a loved one, we have just the right financing for you. Get in touch with us today to learn more and give wings to your dreams.
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