Finance buying guide

How to choose a personal loan

The best way to compare loans is the total cost: the APR, which includes most fees, and the total amount you will repay over the term. Borrow only what you need, choose an EMI you can afford comfortably, and make sure the lender is regulated, since illegal lending apps are a real risk.

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Weighted criteria

What matters when choosing personal loans

Weights add up to 100 and reflect how much each factor usually decides satisfaction. Change them to fit you in the scorecard.

  1. APR & total repayable

    30%

    The annual percentage rate and the total you will pay back, including fees.

    How to check: Compare APR and total repayable for the same amount and term. In India, ask for the Key Fact Statement (KFS).

  2. Fees & charges

    20%

    Processing fees, late payment charges, prepayment or foreclosure charges and insurance add-ons.

    How to check: Read the full schedule of charges; decline optional add-ons you do not need.

  3. Affordable EMI & term

    20%

    A monthly payment you can manage even if your income dips; longer terms lower the EMI but raise total interest.

    How to check: Use an EMI calculator and keep a buffer in your budget.

  4. Regulated lender

    15%

    Whether the lender, or the bank or NBFC behind a lending app, is registered with the regulator.

    How to check: In India, check the lender on the RBI's lists and Sachet portal; in the UK, check the FCA register; in the US, check your state regulator.

  5. Prepayment & flexibility

    10%

    Freedom to repay early and what it costs.

    How to check: Read the prepayment and foreclosure clauses.

  6. Service & complaints

    5%

    Clear grievance process and escalation route.

    How to check: Find the grievance officer details and your regulator's complaint route.

Avoid

Red flags

  • Apps asking for access to your contacts, photos or gallery.
  • Upfront fees before the loan is disbursed.
  • Lenders that cannot name the regulated bank or NBFC behind them.
  • Threats, harassment or public shaming for recovery.
  • "Guaranteed approval" regardless of credit history.
  • Pressure to sign the same day.

Before you pay

Checklist

  1. Decide the exact amount and purpose.
  2. Compare APR and total repayable from several regulated lenders.
  3. Read the KFS or key terms and the fee schedule.
  4. Check the EMI fits your budget with a buffer.
  5. Verify the lender with the regulator.
  6. Keep copies of the agreement and repayment schedule.

Ask the seller

Questions to ask

  • What is the APR, and what is the total amount I will repay?
  • What fees apply, including prepayment?
  • Which regulated entity is lending me the money?
  • Is any insurance or add-on optional?

After you buy

Warranty & returns

Loans have no warranty; your protections come from the loan agreement and lending regulation where you live.

  • In India, report unauthorised lenders on the RBI Sachet portal and complain about regulated entities through the RBI complaint portal.
  • In the US, the CFPB accepts complaints about personal loans and debt collection.
  • In the UK, complain to the lender first, then to the Financial Ombudsman Service.

Track the return window and warranty end date

Common mistakes

Myths vs facts

Myth The lowest interest rate is always the cheapest loan.

Fact Fees can make a lower-rate loan more expensive. Compare APR and total repayable.

Myth A longer term is cheaper because the EMI is lower.

Fact A longer term usually means more total interest.

Where this comes from

Official sources

Criteria and weights are AltFTool's editorial judgement, not a statement by these bodies. This guide is general consumer information, not professional advice.

FAQ

Personal Loans: common questions

What is a Key Fact Statement?

In India, RBI rules require lenders to give borrowers a Key Fact Statement summarising the loan's APR, fees and repayment schedule before the agreement.

Will checking rates hurt my credit score?

Soft checks for quotes usually do not. A full application normally leads to a hard check.

Can I repay early?

Often yes, but some loans charge foreclosure fees. Read the terms.

Free tools

Use these with this guide

Weighted scorecard

Review pattern checker

Complaint letter writer

Warranty & returns tracker

True cost calculator

Also handy: personal loan emi calculator, personal loan calculator, emi affordability checker

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