How to choose the right personal loan? 7 crucial features to evaluate

One of the most commonly used forms of borrowing is a personal loan. It is mostly preferred by borrowers who want instant access to funds without providing collateral. However, many other features of a personal loan make it very attractive among borrowers.

What is a personal loan?

A personal loan is an unsecured loan provided by a bank or a non-banking financial company (NBFC) to address personal needs such as, home renovation, wedding, education etc.

Check out some of the features that you must look for in a personal loan

Loan disbursal time: Before getting a personal check with your lender, the disbursal time of a loan. The time taken to disburse the loan will depend on your eligibility to get one. It is also determined by your credit score. However, the disbursal time may differ from lender to lender. In most cases, the loan will be disbursed within 24 to 72 hours. For a quick loan disbursal, opt for a pre-approved loan as it requires less documentation and hence, the loan disbursal process is faster.

Less documentation: Most personal loans require fewer documents for approval. However, check with your lender regarding the documents required and opt for one with less documentation, as it makes the application process much easier. In the case of online applications, you will need to provide scanned documents. In the case of a pre-approved personal loan, you will be required fewer documents compared to a personal loan.

Interest rates: The lender charges interest on the principal loan amount, so it is an additional charge on your total loan amount. Opt for personal loans that offer attractive interest rates that make them affordable. This will ensure that monthly EMI payments are fixed and affordable.

Repayment options: Check for various repayment options available on your loan. Choose a repayment option based on your financial situation. You can opt for EMIs, instalments, post-dated cheques, online payments, etc. Lenders offer various flexible tenures according to the borrower's requirements. If you want to keep your EMI lower, choose a longer tenure.

EMI calculator: In order to decide the best repayment time span, use an EMI calculator for convenient estimation of your monthly payments. Accordingly, choose a personal loan based on your financial situation. Use a personal loan EMI calculator to decide what repayment time span works best for you.

Usage of the loan: A personal loan is flexible and can fund various needs such as medical expenses, weddings, travel, education, etc. Choose a lender and the amount of credit on basis of the your purpose and financial situation.

Tax benefits: Some personal loans provide tax benefits based on the purpose for which the loan has been used. For example, in the case of home renovation, you can claim tax benefits according to Section 24B of the Income Tax Act, 1961. Similar benefits are also available for some other types of personal loans.

In conclusion, do your research well before choosing a personal loan. Remember the eligibility criteria, interest rates, and repayment options, and get a personal that matches your financial situation and the purpose of the loan.