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You may take a personal loan from a bank or any other lender such as a financial institution for a number of different purposes, from going on a holiday to funding your marriage. A personal loan can come to your rescue when you need emergency funding too. You are not mandatorily required to give any proof of collateral/security while availing personal loans. This is the primary reason why you get quick personal loans. This is also the reason why interest rates on personal loans charged by banks, DSAs and NBFCs are higher than those charged on other loans, like home loans or loans against gold.
What you Should Know
One of the key reasons why people choose a loan from one bank over another, is related to the interest rate charged. This varies from bank to bank, and may also fluctuate from loan tenure to loan tenure. Apart from banks, NBFCs and DSAs may issue loans with lower interest rates, and there are things you should know before you avail loans:
- Where to go – Approaching a bank is the most obvious way to get a personal loan, but interest rates in some banks are high. Non-Banking Finance Companies (NBFCs) may offer you competitive rates worth checking on before you make a decision.
- Fixed and floating interest rates – Two types of interest rates are offered by lenders: fixed or floating. A fixed interest rate is one that’s decided before you take your loan and doesn’t change with a change in the bank’s interest rates. Hence, fluctuations won’t impact your EMI. If you select a floating interest rate, you may get a low rate to start with, but this may change when interest rates of lenders rise.
- Use an EMI calculator – After you have researched various banks’ and lenders’ rates, you can check the EMI you will have to pay by using an online personal loan EMI calculator. A personal loan EMI calculator will let you gauge how much you have to pay every month based on the loan tenure.
- The loan amount – The minimum and maximum loan amount will change from one lender to another. Typically, you get personal loans from Rs.75,000 to Rs. 25 Lakhs from most banks. Salaried employees get preferences of availing higher loan amounts as they can show some security via their income, and therefore lower interest rates too. You also get quick personal loans if you’re salaried.
- Loan tenure – You get personal loans for a tenure of a maximum of five years. You can choose a lower tenure, but your interest rate may be higher.
- Charges – Loans come with several extra charges and you should compare these before you take a loan. These, charged along with interest, can significantly elevate it.
- Credit scores – If you show creditworthiness, such as a good CIBIL score, your interest rate may be lower, as banks are assured that you are in good financial health.
Last Words
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