Planning to Take a Personal Loan in Delhi? Here Are 4 Tips to Help You Choose the Best Lender

Delhi is the largest commercial center of North India and second wealthiest city after Mumbai. Situated between Uttar Pradesh and Haryana, the urban region of Delhi includes Noida, Gurgaon, Ghaziabad, Faridabad and Sonipat and is home to a population of over 26 million people.

If you’re looking for a personal loan in Delhi, here are some pointers that you need to know in order to choose the right lender for you.

1. Difference Between Secured and Unsecured Loans

If you’re taking out a loan, you need to know that the two main types of loans available are secured and unsecured. With secured loans, borrowers must pledge their assets as collateral (equivalent to the loan amount they wish to borrower) to their lender. This is collateral is known as security. The lender has hold of the borrower’s assets until the loan is repaid back in entirety, along with interest. Should the borrower default on repayment of the loan, the lender can seize the assets. 

Unsecured loans require no collateral in order to avail them. These loans are typically offered by new-age lenders such as Upwards, with minimal documentation required. Additionally, application process is completely digital, with quick approval and disbursal. 

Although secured loans have slightly lower interest rates than unsecured loans, the main disadvantage is that many people do not have enough collateral (such as gold, jewellery, etc.) to pledge; or, one might be unwilling to do so. It’s also a hassle to arrange the collateral for the loan in the first place. Also, the process of arranging for a secured loan is a lengthy and tedious process. Therefore, as a borrower, unsecured loans tend to be a better option to go for. 

2. Know the Lender’s Eligibility Criteria

Every lender has a basic eligibility criteria which sets the basis of which applicants they are willing to cater to. This criteria is comprised of parameters such as age, income, credit score, location. 

Many borrowers make the mistake of applying to any and every lender, especially if they are desperate for a loan. Applying to numerous lenders within a short period of time- without even checking their eligibility criteria first, results in a higher chance of rejection for two reasons:

First, if you don’t even meet the basic eligibility criteria of a lender, you’ll be rejected automatically. Secondly, whenever you apply for a loan, it is recorded on your CIBIL report; and numerous loan applications made by a borrower negatively impact your CIBIL score.

By applying to multiple lenders in a short span of time, you will come across as a credit-hungry person, who is desperate for emergency funds and may not be able to repay back their loan. As a result, your application will be rejected due to your lowered CIBIL score, in addition to not meeting the basic eligibility criteria.

When you start searching for a lender, only shortlist those whose eligibility criteria you meet, in order to avoid rejection simply on the basis of ineligibility. Apply to only 2 or 3 lenders in a month’s time. 

3. Understand All the Fees

Aside from the interest rate, there are several fees associated with personal loans. This includes prepayment charges, late payment fees, and foreclosure fees. It’s important to know these numbers when you are researching on a lender.

Lenders generally levy a processing fee of anywhere between 2-3% on your loan, in addition to GST. This amount gets deducted from the loan amount that you are approved for. If you decide to make part prepayments on your loan, it can help reduce your overall interest paid. Different lenders have their own policies on prepayment, along with fees for the same. 

4. Consider All Factors

For most borrowers, they want to go with the lender who provides the lowest interest rate. While interest rate is indeed an important criteria to consider, it’s not the best criteria on which to base your decision. This is because regardless of whether you’re a first-time borrower or not, you want to ensure you can comfortably repay you monthly EMIs, and the loan repayment tenure is another factor that will determine this.

Opting for a loan with a longer tenure is more beneficial to you. For example, if you take a loan of Rs 1 lakh at an annual interest rate of 18%, and select a repayment tenure of 24 months, your monthly EMI will amount to Rs 4,992. For the same amount and interest rate, the monthly EMI increases to Rs 9,168 when availed for a tenure of 12 months. Compared to the former, this is a staggering 83% increase in your EMI and creates a bigger burden on your monthly finances. 

Therefore, even if the interest rate is slightly higher on the loan amount you want to take, you can always choose a longer repayment tenure in order to reduce the monthly EMI. Remember, your ability to consistently repay the EMIs on time has a direct impact on your credit score- which will determine your eligibility for taking loans in the future.

Conclusion

If you want to apply for a personal loan, remember to first get all your finances in order. This includes knowing exactly how much your need to borrow (and comfortably repay), checking your CIBIL score, and keeping common KYC documents available for the application process. Get your personal loan in Delhi from Upwards today, with a loan up to Rs. 2,00,000 disbursed to your account in just 48 hours!

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