Whether you plan to travel, buy a house, or consolidate debt, different types of loans offer unique terms and benefits. As you begin shopping for the loan that best suits your needs, here are some things you should know about the various loan options available – from Personal and Business Loans to mortgages and student loans. Continue reading to choose the best Personal Loan in India with the lowest interest rate and fees.
Key Things to Consider When Loan Shopping
When you need money, taking out a loan can help make it happen. But with so many different types of loans available in India, it can be overwhelming to start research. Here are some key things to remember when loan shopping.
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Do your research
The first step is to understand the different types of loans available to you. Each loan has its pros and cons regarding interest rates, repayment terms, collateral requirements, etc. Familiarize yourself with the options like Personal Loans, secured loans, unsecured loans, credit cards and more.
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Check your credit score
Most lenders will check your credit score before approving you for a loan. A good credit score of 700 or above will qualify you for the best interest rates, while a lower score may limit your options or mean higher rates. Request your credit report from major credit bureaus and check for any errors that could negatively impact your score.
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Get pre-approved
Once you’ve narrowed down the loans you’re interested in, get pre-approved from multiple lenders to compare interest rates and terms. Pre Approval offers show you the amount you likely qualify for and the estimated interest rates and fees but aren’t a final commitment.
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Compare interest rates and fees
Interest rates and fees differ widely between lenders, so thoroughly compare rates and fees like processing fees, prepayment penalties and other costs. For an accurate comparison, calculate the effective interest rate, which factors in all loan costs over its full term.
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Consider the repayment schedule
Some loans require equal monthly installments, while others let you make interest-only or variable payments. Choose the repayment schedule that best fits your cash flow needs. Shorter repayment schedules generally come with lower interest costs overall.
Different Types of Loans
Personal Loans
Personal Loans combine one loan amount with a fixed interest rate and repayment term. The money is paid to you in one lump sum, and then you repay the amount plus interest in fixed monthly installments.
Personal Loans are often unsecured, meaning they don’t require you to pledge any collateral security. This makes them easier to qualify for, but you’ll generally have a higher interest rate.
Some benefits of a Personal Loan include:
- Flexibility – You can generally use the money for any purpose.
- Simple terms – The interest rate and monthly payments stay the same.
- Quick funding – Money is disbursed quickly once your loan is approved.
Car Loans
When you finance a vehicle purchase through an auto loan, you borrow money from a lender to buy or lease a car. The car serves as collateral, so you’ll typically get a lower interest rate than an unsecured loan. Car loans have fixed rates and terms, usually 24 to 84 months.
Some benefits are:
- Low rates – Due to the collateral, rates tend to be lower than unsecured loans.
- Hassle-free funding – Money is disbursed directly to the dealership.
- Wide availability – Most lenders offer auto loans.
Mortgage Loans
A mortgage loan gives the lender the right to take your property if you fail to repay the money you’ve borrowed plus interest. Mortgage loans are used to borrow money against the value of a home you already own.
Mortgages come with several options:
- Fixed-rate – The interest rate stays the same for the loan term.
- Adjustable rate – The rate changes over time based on an index rate.
Other Types of Loans
- Business Loans: These funds that the business needs come in various forms. Collateral requirements vary, but personal guarantees are often required.
- Credit Cards: A credit limit functions as a revolving loan that you repay as able. Credit Cards tend to have higher interest rates compared to other loans.
- Student Loans: These fund higher education and may be subsidized, cosigned or Parent PLUS loans. Most offer lenient repayment options as students establish careers.
Conclusion
With so many different types of loans available in India, choosing the one that best matches your needs can feel overwhelming. But by researching the various options, you’ll be in a solid position to find the best Personal Loan in India for your specific situation. Stay informed, be diligent, and negotiate if possible. Armed with knowledge about different types of loans, can help to get the best deal possible.
