Whether it’s a vacation, a home improvement project, a wedding, or an emergency, a personal loan can help you meet the need of the hour as quickly as possible. Thanks to new digital loan solutions, today, taking out a personal loan is easier than ever. These services are extended to people, who are typically unserved / underserved by traditional loan providers, and the entire loan approval process, including underwriting, risk assessment, disbursement and payment. reimbursement model, is digitized to ensure a seamless customer experience.
Digital lending platforms leverage the power of cutting-edge technologies, such as AI and data science, to deliver personalized personal loans to people across the credit spectrum. They require minimal documentation and the loan is approved almost instantly. While taking out a loan from a digital lender to meet your urgent financial needs is a quick and hassle-free process, choosing the right lender is essential.
Here are some ways that can help you choose the best loan provider:
Choosing the right loan product
There are over a thousand lenders in the market who offer several loan products that continue to grow with each passing day. If the need is immediate and there is a sense of urgency, a personal loan that takes longer to be approved might not be a feasible choice. A borrower must first assess and choose the right product to finance their needs. Although personal loans require collateral, there are other line of credit products that require no collateral, offer instant loan disbursements, and offer flexible repayment options.
Compare loan interest rates
Once you have determined the amount you need to finance a certain need, check the interest rate charged by the lender. The lower the interest rate, the lower the EMIs would be. Small percentage differences may seem insignificant, but they can make your loan much more expensive in the long run. Therefore, before applying for a loan, it is essential to compare the interest rates charged by different lenders.
Understanding the fine print
Each lender will present you with an official document dictating the terms and conditions of your personal loan. The contract is legally binding and it is important to make sure that you know and agree to each of the terms and conditions. If you have any doubts, ask your lender for clarification before moving.
Look for hidden charges
Besides the interest rate, it is also important to know the fees and charges that you are required to pay to take out a personal loan. These include a processing fee, which is deducted from the amount you receive. There are also other fees, such as late payment fees or check bounce fees, during the life of the loan. Therefore, it is essential to check both the interest rates and the fees charged by different lenders to determine the affordability of their offers.
Prepayment charges and penalties
It is wise to make prepayments on your loan whenever you have additional disposable income. It lowers the cost of your loan because the interest accrues for a shorter period. However, few lenders charge high fees on prepayments. It is therefore important to know if there are any prepayment charges or penalties before obtaining a loan. It is better to go for loan providers who are flexible when it comes to loan repayments and make sure that they do not put the burden of prepayment penalties on you.
by, Anil Pinapala, Founder and CEO, Vivifi India Finance