Are you planning to buy that expensive gadget or craving for a family holiday abroad, but don’t have the budget to do so? A personal loan could be an answer to fulfill your plans without getting into the hassle of tedious documentation. Although a personal loan is considered as the means to quick money, it comes at a high cost. Therefore, it is important to know who is offering the lowest rate of interest.
Like all financial instruments, it isn’t easy to pick the best personal finance product that would suit your requirements. Most personal loans come with hidden charges, which make it imperative for a consumer to make proper comparisons for an informed decision.
Rate of Interest:
This is the most important aspect of any loan and depends upon the credit ratings of an individual. Since personal loans are considered as unsecured loans, the rate of interest is quite high. Personal loan rates in India range anywhere between 12% to 24% and different rates are charged to different customers based on criteria set by banks. As such, it is advisable to check with different banks and negotiate on the interest rates since it may vary from one bank to another.
It is a onetime fee to subsidize the costs of the payment systems which is non-refundable. The fee is between 2%-3% of loan amount. One needs to find the lowest fee being charged by the lenders.
Part-payment and prepayment charges:
If a customer thinks he or she can prepay the loan principal, he or she should opt for the bank which offers the option to foreclose the loan and levies lesser charges. Having a prepayment option also helps in transferring the loan to another Bank which may offer a cheaper rate.
To compare the rate of interest and the processing fee, first calculate total interest being offered by the bank and then add the one-time fee and see the difference to find out the cheapest rate.
To compare rate of interest and prepayment options, the borrower needs to first understand that if the loan is prepaid then the customer saves on interest cost. Therefore, one needs to look for a bank with the lowest prepayment charge.
The author is the Co Founder of deal4loans.com