Things to Know about Personal Loan before Obtaining it

Due to this increased popularity of online instant personal loans, sellers of loan products are everywhere. When there is cutthroat competition, it makes it even more important for the customers to be well aware of the market and the product. Because every seller is trying to get their products recognised and sold. For this, they use different marketing gimmicks which might trick the customer into thinking that they are getting a very low-cost product but in reality, they're just paying the same.

Therefore, we have maintained a list of points for you to know before obtaining a Personal Loan.

Zero percent EMIs:

At first glance, it looks like that these are EMIs of a loan where we do not have to pay any interest. This is what most people felt and bought the products and later on after realising that they're actually paying the same amount were highly enraged.This lead to RBI banning such schemes but now the same scheme is being offered under the name no cost EMI. What you need to do as a rational customer is just to ignore such schemes.

Compare:

When there is so much competition, lenders roll out unbelievable offers which are just too good to believe. Therefore don't buy any loan product in haste. First, do a proper comparison of interest rates, and other charges such as processing charges etc. There are a lot of websites available these days that are specifically set up for comparison purpose.

Banks have lower interest rates:

Since banks only give loans to people with a good credit score, they offer personal loans at lower interest rates. Since they are assured their customers had been good borrowers in the past and will repay their loan on time too.

NBFCs have high-interest rates:

Generally, the non-banking financial corporations charge a slightly higher interest. This is because they give loans to people who have lower credit ratings too. This means that they are taking higher risks, their money might or might not be repaid.

Processing fees:

Credit-lending agencies charge processing fees on personal loans, it can be as low as 2 per cent and goes up to 5 per cent. This will amount to a good chunk of money. Therefore find out how much processing fees your loan scheme has.

Prepayment charges:

Prepayment refers to the payment of a portion of the principal amount beforehand. This leads to reduced interest. A lot of credit lending agencies would charge you if you prepay some amount. Find out how much your lender charges on prepayment.

Foreclosure Charges:

Foreclosure means paying the whole outstanding amount to the lender well before the maturity date. This saves a lot of money for the borrower which would have otherwise gone into interest. But the lenders are smart enough to know how to extract back this amount. They take this money back from you in the form of foreclosure charges.

Calculate EMI payout:

Calculate the exact amount you'd be paying every month once you take the loan. This would help you in planning your finances and budgets better. Different companies provide their personalized Calculators such as ICICI Personal Loan Calculator etc.

Terms and Conditions:

Probably the most important thing in the whole process is the terms and conditions which most people ignore because of the technical jargon used and the small font size which makes it even difficult for you to read. Think of it like this, they made it in such a way that you don't read it, it means you should definitely read it.

These are a few points you must keep in mind before going for any loan from any Bank or NBFC so that you don't have to lose out on the best offer you could have availed.