The advent of Digital Lending in India has made traditional financial institutions like banks re-think their product offerings to suit the internet friendly millennials. Technology too has played an important role in the rise of Digital lending with digitalized loan application process, minimal documentation, competitive interest rates and quick disbursement thwarting the traditional lending pain points of lengthy documentation, plethora of documents, long delay in disbursement etc.
Banks not only have to worry about the influx of technology in lending practices, they also have to try to maintain an advantage amidst the fierce competition that comes with the range of Personal Loan products in the market.
For the consumer, while the choice of options is welcome, it is confusing to choose which of the personal loan offerings are best suited to their requirements.
Here are 5 parameters that could help you choose the right personal loan.
What is the point of applying for a personal loan when you don’t know if you are capable of meeting loan application criteria or not. This is the first parameter to keep in mind when comparing different personal loan offerings.
All banks have their own set of eligibility criteria. You can read about the criteria on the respective bank’s website or by visiting the local bank branch.
Most common criteria considered by banks are
- if the applicant is salaried or not.
- If salaried, then what is his/her income, which organization or association the individual is affiliated to etc.
- The common minimum age set is 21 years with maximum age being 60 years at the time of personal loan maturity.
- The minimum net monthly income set is generally Rs.15000.
Cost of Borrowing
Comparison websites online help the applicant to get an idea of which banks are offering the best interest rates compared to their competitors.
Banks also charge prepayment charges for clearing of a loan ahead of the completion of tenure. Loan processing charges and late EMI payment charges are two examples of additional charges that banks levy (these charges are not constant for each bank).
During the year, banks come out with promotional offers to help increase visibility and popularity of the personal loan product.
Monthly Installment and Repayment Tenure
The next two parameters are co-related. Increase in the amount of EMI payments per month will reduce the loan repayment tenure, whereas a decrease in EMI payments each month will increase the repayment tenure.
Wise thing to do is set a realistic EMI amount to be paid each month so that there is no burden on your monthly budget planning.
Keep in mind that with longer loan repayment tenure, the interest rate increases.
Even if the interest rate remains unchanged, a longer tenure would mean an increase in the actual amount to be paid back to the bank.
Loan Approval Time
We usually take a personal loan when in need of urgent funds. Urgent needs could mean a medical emergency or a latest smartphone in the market or even funds for travelling abroad. All these scenarios make Loan Approval time an essential parameter to compare personal loans The easier and quicker one can get a loan, the more likely that we will choose the option of digital lending platform.