One of the most widely used options for meeting an urgent requirement of funds is the personal loan. It is by far the best way to get money at short notice. In India, you can get personal loans in many ways. They include the public sector, private sector, and co-operative banks; non-banking financial institutions; and private money lenders. In this post, we will discuss the pros and cons of borrowing money from private banks and private money lenders.
Private Bank Loans
If convenience is of primary concern to you, then you should consider borrowing money from one of the private banks. They provide personalized service by sending an agent to you provided credit history is in order. As they provide door-step service, you do not have to run from pillar to post to for getting the loan sanctioned. However, they may charge a higher loan processing fee compared to public sector banks.
When it comes to the time taken for the approval of your personal loan application, private banks are faster compared to those operating in the public sector. This is to say that if you are in urgent need of funds, private banks may be a better option.
However, one aspect you have to keep in mind is with respect to the prepayment restriction imposed by private banks. You may be required to wait for at least for a period of 6 months to one year prior to paying off the loan.
Private sector banks are far ahead when it comes to digitization and employment of technology for customer-relationship management compared to public banks. They make it easier for you to know the status of your loan application as well as repayment through mobile apps.
Private Money Lenders
Whether you are applying for a loan from a private or public sector bank, the first thing they check is credit history. If your credit score does not match the requirement specified by the banks, they may reject your application. Private money lenders often do not go for any kind of credit history check.
Typically, private money lenders often disburse money quickly and unlike banks that ask for several documents prior to processing your application, they just limit documentation to a promissory note on a stamp paper. Further, they don’t charge any processing or prepayment fee. This means that eligibility criteria followed by them are not as stringent as done by the banks.
However, the risk involved when borrowing money from a private lender is extremely high. This is because they charge very high-interest rates. Typically, it ranges from 20 percent to 45 percent, depending on the amount borrowed and the tenure asked for by you. You may be able to repay the loan on a daily, weekly, monthly basis or as per the terms agreed upon, but if you default installments or fail to repay, you may be harassed by them until the borrowed amount is completely recovered.
In conclusion, opt for private money lenders only if you don’t have any other option. And, deal only with licensed private money lenders.
At Finwizz, we have tied up with some of the best banks and financial institutions in the country and we can help you if you are looking for a personal loan to meet an emergency requirement.