Borrowing is always a costly affair. If the cost is not tangible in terms of interest, there is the factor of the moral obligation to repay. When a borrower decides on taking a loan, he is faced with a wide choice. In today's market you don't have to go searching around. There are lots of financial institutions who routinely bombard the consumers with advertisements and invitations to take loans. It is almost as if taking a loan is now a necessity for all.

When you decide you require a loan, you must determine how much you really need? Also budget your expenses and know how much you can afford to pay in monthly instalments as well.

How then do you go about making your choice? Does it solely depend on who is ready to give you the amount you need? Or does it depend on how successfully the bank has advertised their product to you? If you must choose, then choose a loan that is cheap not expensive as that will determine how much you save at the end.

Presuming you are clear on the purpose and amount of loan you need, there are certain criteria that you must be aware of to know the difference.

Criteria 1: Licensed / authorized lenders It is imperative that you choose a lender who is authorized as he will be regulated by the laws of the land. You will also be surer of their credibility and can have reference checks as well.

Criteria 2: The rate of interest The interest is added to your principal and this; spread over the period of repayment will determine your monthly instalments. Check around for the bank, which offers the best and lowest rate of interest in the market. You don't want to find that you have paid more interest than the principal at the end of the term. Also know in advance if the rate of interest is fixed or adjustable, as the latter will turn out to be more expensive.

Criteria 3: Subsidies applicable there are certain types of loans like educational loans that can be subsidized. If you can obtain this, you can save a lot.

Criteria 4 : Fees and Hidden charges Without doubt, those who offer to lend you money with interest are not in the business of charity! The loan has to offer them some returns. You are generally charged a fee when your loan is disbursed. Therefore it is imperative that you know how much more this is going to cost you.

Criteria 5: Repayment penalties Always check with the lender for any early repayment clauses, which would include a certain percentage of the interest that you would pay. If you choose to settle the loan before the end of the loan tenure, this can be quite a bit if money.

Criteria 6: Loan amount if you have a fairly good credit record and a steady income, you may be offered a loan that is far above what you require for the moment. There is always a temptation to take it all. Remember, it is a loan and you will still owe that amount. Take only what you need, nothing more. In this way you will have a healthy repayment status as well.

The key is to choose a loan that is not expensive so that you can save your own money. Each penny saved is a penny earned!