Currently there is a plethora of loan products that are being launched on a regular basis by the competing financial institutions in order to woo the prospective borrower. The range of personal loan products that available in the market is wide and often confusing. Choosing the right personal loan product that suits your requirements best can be quite a daunting task. Here are a few parameters that can be used to evaluate the suitability of a personal by comparison among similar products available in the markedly currently.
Interest rates: This is the primary factor that should influence any personal loan decision. Contrary to popular belief there is a huge difference among the interest of personal loan products on offer currently. One needs to do a detailed comparison after obtaining the interest rates from online sources. There are some promotional products at certain periods during a year which banks use to enhance market visibility and popularity. It is wiser to opt for such lowered interest loans as they can have significant impact on the overall amount paid back over the repayment tenure.
Allied Charges: The various discounts in allied and additional charges that the bank offer can also help reduce the overall amount substantially when it comes to repayment. A processing fee discount of Rs. 10000 on a loan of Rs. 1000000 would imply as good a saving a 1-2% reduction in the interest rate over a 5 year period.
Repayment Tenure & EMI: These two parameters are interlinked as increasing one can result in reducing the other. Depending on the maximum repayment tenure that the banks offer a more realistic and comfortable Emi can be worked out so as to keep the personal loan servicing a lesser burden in the monthly budget and planning. However one needs to be carefully while opting for a personal loan with longer repayment period as it may come at higher interest rate. Even at the same rate of interest a longer tenure would mean huge increase in the actual amount being paid back to the bank. Thus with higher interest rates and longer tenures the amount will multiply making the borrowing unjustifiable. In such cases a comparison of the amount paid back in varying tenures must be made to realize the additional expense involved in the process.
Eligibility Criteria: This parameter cannot be overlooked by the prospective personal loan borrower as it determines whether he shall get the desired loan from a particular bank or not. All banks have their own different set of eligibility criteria. The local branch managers additionally have some authority in waiving off certain requirements based on their discretionary powers. It is a great idea to explore all such possibilities when applying for a personal loan to banks.
Approval Time: The personal loan is mostly resorted to when in urgent need of money. Thus the approval time is a vital parameter that can affect the utility of the loan. There are banks that have less than a day as the turn around time for personal loan when the documents are ready and in order. It is worthwhile to explore the feasibility of getting such loans.
Comparing these parameters would provide a much better insight regarding the suitability of the personal loan product.