Personal loans are handy when you are in a spot and need some urgent cash. However, personal loan are tricky and you need to know as much as possible about their basics before applying for one.
Before you choose your personal loan:
Calculate the inexpensive loan offer: Personal loans come with very high interest rates ranging from 14% to 24%. Compare personal loan interest rates and get the complete picture by understanding the annualized interest rates for each offer.
Then figure out the total amount of repayment you need to shell out with all the offers before opting for the loan of your choice.
Processing fee et al: You need to keep in mind the processing fee and other fees that will be levied when you apply for your personal loan.
Prepayment penalty check: Ask upfront if there would be any penalty payments for prepayment of the loan at any point in time. More often than not loan consumers tend to pay up their loans earlier than planned to be rid of debt. Hence, its important to know if your personal loan offer allows part prepayments.
If that is the case, then you should be aware from what time frame in the loan period you can start prepaying and understand the cost you incur due to such prepayments in part or full.
EMI and tenure: Evaluate all loan offers. The first condition for loan offer selection is the total money outflow that the loan will cost. The second factor is the EMI. A loan offer with a lower EMI and a longer tenure may seem attractive, as it could be easy on your purse strings, however not all such loans prove to be cost effective in the long run.
Hence, first calculate the total loan cost and then try to opt for a higher EMI, which you can comfortably manage to enable shorter loan tenure.