Want personal loan? Experts warn you about what to do before applying

A personal loan is one of the major options that a loan applicant thinks of during a financial emergency. The reason behind that is  due to the disbursal of money being  fast and it doesn't require any collateral or mortgage. Hence, a loan applicant opts for a personal loan without checking the interest rate applicable, checking an online personal loan calculator and other criteria. However, this is a bad thing to do as it leads to big losses - it leads to leaking of money through higher EMIs. 

Personal finance experts recommend recourse to a personal loan calculator, which is easily available on Google. A personal loan applicant must check this while applying for a loan. Also, be aware of the fact that it is not that every time a loan applicant applies for a loan that s/he will get the money disbursed into his or her account. Yes, personal loan applications do get rejected too. Hence, a personal loan applicant must check his or her eligibility criteria and interest rate being levied as it varies from 11 per cent to 20 per cent! Surely, a massive gap!

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Speaking on the various factors that play an important role in granting of a personal loan, Kartik Jhaveri, Director — Wealth Management at Transcent Consultants told Zee Business Online, "Personal loan is a collateral free loan and its disbursal is much faster than the majority of other loan options. However, there are some variables like eligibility criteria, loan EMI, personal loan interest rate, etc that a loan applicant must check before filling up the personal loan form for the bank." Jhaveri said that selecting a bank is also important because the personal loan interest rate varies from lender to lender.

Jhaveri said that a personal loan is available from various NBFCs, private banks and public sector banks but their interest rate varies. NBFCs charge the highest interest rate while a public sector bank levies least interest rate. So, a personal loan applicant must opt a public sector bank as the lower personal loan interest rate would lead to lower EMI, which will help the loaned person in easy repayment of the loan.

Elaborating upon the use of personal loan calculator Jitendra Solanki, a SEBI registered investment expert says, "One can use personal loan calculator while applying for a personal loan and make his or her banking official known about his or her idea about the EMI he or she would be paying. It helps the loan applicant to save his or her money because to some extent banking officials can lower the personal loan interest rate on their own capacity. Generally, the personal loan interest rate varies in the same bank and when asked they say your CIBIL rating doesn't allow them to avail lower personal loan interest rate." Solanki said that at this point a personal loan application will have to press for the lower interest rate to slash his or her personal loan EMI.

On how much money one can avail via personal loan Solanki said, "Generally, a bank grants Rs 50,000 to Rs 25,00,000 as a personal loan that the loan applicant has to repay in three months to five years. However, some fintech firms allow the applicant to repay the loan sanctioned in six years but their interest rate is very high. So, if one can repay the loan in a lesser period, one should opt for the public sector bank for lower EMI." Solanki also said that in the personal loan, banks charge a processing fee which also varies from 0.4 per cent to 3 per cent, depending upon the lender you choose. Public sector banks charge lowest processing fee while the private sector banks, NBFC and fintech institutions levy more.