How to choose the right personal loan platform wisely

Digital lending platforms leverage the power of advanced technologies such as AI and data science, to provide personalized personal loans to people across the credit spectrum.

Whether it’s a vacation, a home improvement project, a wedding, or an emergency, a personal loan can help you meet the need of the hour in the fastest way possible. Thanks to new era digital lending solutions, it is now easier than ever to take out a personal loan. These services are extended to people who are typically unserved/underserved by traditional loan providers, and the entire loan approval process including underwriting, risk assessment, disbursement and model refund, is digitized to ensure a seamless customer experience.

Digital lending platforms leverage the power of advanced technologies such as AI and data science, to provide personalized personal loans to people across the credit spectrum. They require minimal documentation and the loan is approved almost instantly. Although getting a loan from a digital lender to meet your urgent financial needs is a quick and hassle-free process, choosing the right lender is very essential.

Here are some ways that can help you choose the best loan provider:

Choose the right loan product

There are a thousand lenders in the market who have several loan products to offer which continue to grow with each passing day. If the need is immediate and there is a sense of urgency attached to it, a personal loan that takes longer to be approved might not be a feasible choice. A borrower must first assess and choose the right product to finance his needs. While personal loans require collateral, there are other line of credit products that require no collateral, offer instant loan disbursements, and offer flexible repayment options.

Compare loan interest rates

Once you have determined the amount you need to finance a certain need, check the interest rate charged by the lender. The lower the interest rate, the lower the EMI would be. Small percentage differences may seem insignificant, but they can make your loan much more expensive in the long run. Therefore, before applying for a loan, it is essential to compare the interest rates charged by different lenders.

Understand the fine print

Each lender will present you with an official document dictating the terms and conditions of your personal loan. The contract is legally binding and it is important to ensure that you know and agree to each of the terms and conditions. If you have any doubts, ask your lender for clarification before you go.

Look for hidden fees

Apart from the interest rate, it is also important to know the fees and charges that you are required to pay for taking out a personal loan. These include a processing fee, which is deducted from the amount you receive. There are also other fees, such as late payment fees or NSF check fees, during the term of the loan. Therefore, it is essential to check both the interest rates and the fees charged by different lenders to determine the affordability of their offers.

Fees and penalties for prepayment

It’s wise to prepay your loan whenever you have extra disposable income. This lowers the cost of your loan, as interest accrues for a shorter period. However, few lenders charge high fees on prepayments. It is therefore important to know if there are prepayment charges or penalties before you qualify for a loan. It is better to opt for loan providers who are flexible regarding loan repayments and make sure that they do not burden you with prepayment penalties.

by Anil Pinapala, Founder and CEO, Vivifi India Finance

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