Long gone are the days when borrowing from family and friends was a much-preferred way of borrowing. With financial technology speeding up, things are changing faster than ever. It’s not feasible to avail a personal loan for all financial needs at the click of a button.
Whether it’s an international trip, lavish wedding, medical emergency, higher studies, etc., an instant personal loan can be extremely helpful to cover for all expenses. A few of the best personal loans available presently in the market are HDFC Bank, Bajaj Finserv, SBI Personal Loan, etc.
Personal Loan is quite insecure in nature, and which means that you do not have to offer any collateral security against the loan amount. Moreover, there is no need for any lump-sum payments. Plus, there are no loan repayments in full, the amount is paid in EMIs. Because of the still market competition, it is easy to have agreeable rates of interest for your money needs.
Salient Features of Personal Loans
Most companies have different features of their personal loan offering, however, there are a few key features that remain common across the board. Let’s see which are the best underlined:
- Prospective borrowers can avail up to Rs. 40 Lakhs or above, without forgoing any collateral assets.
- Maximum repayment tenor can go up to 72 months, turning the EMIs somewhat affordable.
- Personal Loan rates of interest can begin at as low as 10.99%, making them ideal for all borrower types.
- Processing charges can either be nil or at a 1% low.
- Adaptable eligibility criteria for personal loans are followed by lending institutions while examining applications.
Personal Loan Interest Rates
Interest rates are one of the prime determinants of your personal loan decision. It clearly helps you make a call on the suitability of your personal loan. Personal loan interest rates differ as per the lending institutions, and you can also conduct a detailed comparison to select the best proposition. When you are out in the market, you consider factors like an appropriate rate of interest, penalties, and other relevant charges.
So there’s one important aspect of personal loans which requires special attention, this is the rate of interest.
Selecting a lender based on the interest rates
The applicable rate of interest can have a constructive effect on the total cost charged and payable at the time of repayment. Every small change can bring about a difference. Currently, there are two types of structures followed by the lending institutions:
- Flat Rate Structure
- Reducing Balance Rate Structure
When most of the lending institutions use reducing balance rate structure in the financial market to create a loan schedule, there will be a few to offer a flat rate of interest structure.
Flat rate structure
When you take up a Personal Loan under the flat-rate structure, the interest amount and the principal component of the EMI remains the same during the repayment tenor. This is because interest based on a flat rate structure is basically the total amount taken and the final rate of interest applicable.
Reducing Balance Rate Structure
When you take up a Personal Loan under the reducing balance rate structure, your interest and principal components are recalculated every month, while the EMI remains unchanged.
The simple idea is that when the principal amount reduces, the interest liability automatically reduces. However, under the flat-rate structure, the amount stays static.
As per our recommendation, the reducing balance structure is more advantageous over the flat-rate structure where the EMIs are much lower and interest payments are significantly lower too.