When you start looking for a personal loan for the first time, a lot of things will confuse you. Which lender is right? What rate of interest will be good for me? Questions like this will keep occupying your mind . So, as a first-time borrower, how you would get out of this situation.  

Well, the best thing you could do is to gather relevant information. An important decision like getting a personal loan should have the total focus to make sure; the outcome is in your favour.  Because if you choose a lender which will be unsuitable, during the repayment, there will be issues. 

To tackle the issue for the first time borrower, we have prepared a short guide for you. After reading it, you will have comprehensive knowledge to make the right decision to get the best personal loan. So, here how you should get started.

The anatomy of a personal loan

The first thing you should figure out is how a personal loan works. Since you will be borrowing money from a bank or app-based lenders such as Indiabulls personal loan or Fullerton personal loan, you have to fulfil their eligibility criteria. 

Then you have to check the interest rate and the loan tenure. Do not forget to check for the processing fee and other charges.  These charges are likely to increase the cost of taking a personal loan.

Let’s take an example of Indiabulls personal loan to under it better. 

• Indiabulls offers an instant personal loan from ₹1,000 to ₹ 15 lakhs.
• The rate of interest begins at 13.99% P.A
• The processing fee is 3% onwards depending upon the loan amount. 
• The bounce charge is ₹400 per bounce. 
• The loan tenure is from 3 months to 36 months. 

Do you notice the processing charge and the bounce charge? They will surely increase the cost of your personal loan. So, be careful in choosing a lender. This is basic anatomy of personal loan. Depending upon the lender, the charge will vary. Now, let us move on to the rate of interest.

Rate of interest for a personal loan

The rate of interest is the essential thing you have to know. Why? Because when you are ready to repay the loan, the price of interest will decide how much you are going to as monthly EMI.  A lower monthly EMI would get you the best personal loan. 

Currently, in the personal loan, there are two types of rate of interest. There is (1) fixed rate of interest and (2) Floating interest rate.  

In a fixed rate of interest, the interest will not change for the entire loan term. A floating interest rate will vary depending upon the market’s conditions.  When you apply,  the price of interest does not apply at random. Certain factors decide it.  Here are those factors.  

• The credit score of the borrower
• The income and spending of the borrower
• The employment of the borrower 
• The relationship with the lender 

The loan tenure of the loan 

After the interest rate, you will have to check the loan tenure for the loan.  You have two options. Whether you want to a short loan term or a higher loan term,  In shorter loan, the interest rate and monthly both will be higher while a longer loan term will have lower EMI and interest rate.  It depends upon you choose as per your needs. 

 This was a short guide for a first-time borrower to get a personal loan. We hope this guide will help you in choosing the best personal loan.