How to choose the best Personal Loan lender?

5 MinsJan 20, 2023

Personal loans are a convenient form of financing that you can take advantage of when you need funds urgently. They can be used for vacations, education fees, emergency medical bills or house repairs. Personal loans can fulfil short-term financial obligations without depleting savings or liquidating long-term investments.

How to choose the best Personal Loan lender?

There are multiple types of personal loans available, such as regular Personal Loans, instant personal loans, and pre-approved or pre-qualified personal loans.

You should opt for a personal loan after conducting sufficient research. Read on to discover how to choose the right lender for a personal loan.

1. Interest rates:

Interest rates on personal loans are one of the most important factors to consider while researching lenders. Banking institutes and NBFCs (Non-Banking Financial Companies) may charge different interest rates. Your CIBIL score may also influence the interest rates. Since personal loans have no collateral, lenders often offer interest rates based on your CIBIL score. Therefore, if you have a good credit score, you can negotiate lower interest rates.

Generally, interest rates may vary from 12% to 28% p.a., with a tenure of up to 4-5 years. Axis Bank currently offers personal loans at interest rates of 10.49 % - 21 %, with maximum repayment terms of up to 5 years.

2. Loan amount:

All lenders have minimum and maximum personal loan amounts. Therefore, it is necessary to calculate the total amount needed for the loan before approaching a lender. For instance, Axis Bank offers personal loans of ₹ 50,000 to ₹ 40,00,000, depending on the eligibility requirements.

Depending on your credit score and income, interest rates and loan amounts may vary from lender to lender.

3. Processing fees:

There are other costs associated with loans, in addition to interest rates. It is common for lenders to charge a processing fee for loan applications.

The processing fee generally varies from 1.5% to 3%. Axis Bank charges 1.5% to 2% of the loan amount + GST on personal loan processing.

You can reduce your interest cost by prepaying a loan. But, lenders may then charge pre-payment fees. Therefore, it is crucial to consider all charges to make an informed decision.

[Also Read: Choose a personal loan interest rate that fits your pocket]

4. Processing time:

A pre-approved or instant personal loan is available faster than standard personal loans. These types of loans are usually offered to existing customers with good credit scores. As a result, you may get instant loan disbursal, depending on your credit history.

Axis Bank’s 24x7 personal loans provide a seamless loan-sanctioning process that is hassle-free and paperless. Axis Bank's existing pre-qualified customers can enjoy instant disbursals.

Depending on the lender and your eligibility, instant loans are available within minutes to a few days. On the other hand, regular personal loans can take 4 to 5 days, depending on your credit history and the lender's policies.

5. Eligibility criteria:

Ensure that the personal loan eligibility criteria are easy-to-meet eligibility criteria. This helps simplify the approval and verification processes, which reduces the effort involved in obtaining funds.

The following are the general eligibility criteria for availing of a personal loan from Axis Bank:

  • Salaried employees
  • Age of 21 to 60 years at the time of maturity of the personal loan
  • Minimum monthly income – ₹ 15,000

Even though there are many personal loans available, choosing the right one requires a significant amount of research. By carefully analysing interest rates, other charges and loan repayment terms, you can choose the best lender for a personal loan.

Want to calculate the monthly EMI on a personal loan? Check out Axis Bank's personal loan EMI calculator.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.