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Things to Know Before Signing A Personal Loan Agreement

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Things to Know Before Signing A Personal Loan Agreement

  • Highlights

  • Know the features of the personal loan

  • Know the processing fees, charges and penalties

  • A longer tenor makes the loan costlier

  • Read the fine print carefully before taking the loan

Personal loans can help you take care of your personal financial needs. These include advance courses, medical emergency, wedding, renovation, vacation, and more. However, before signing on the dotted lines, make sure of certain things.

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Features of Personal loan

You should read the final agreement, in order to confirm that the features of the personal loan that you had read, and discussed with the advisor, are covered. For example, Flexi personal loan by some NBFCs provide flexible loan facility. The facility allows you to borrow an amount as per your requirement, without using the whole loan limit. The interest is applicable on the borrowed sum.

The interest amount, tenor, interest rates should match with what you discussed with the lender. The personal loan emi calculator which you used to calculate the EMIs are indicative in nature. Before putting your signature, know what your actual EMIs would be.

Additional Read: Know All the Features and Benefits of Your Bajaj Finserv Personal Loan

The flexi personal loan offers multiple withdrawals. In flexi loan, the loan limit decreases every time you withdraw, but the loan limit does not increase when the principal is repaid. In flexi interest-only the loan limit increases when the principal is repaid. You need to be sure that there is no limiting clause for the option that you have chosen.

Fees and Taxes

You need to read the fine print to know all the fees, and add-on charges, so that there are no costs hidden from your knowledge. The loan document lists general terms, and conditions. Peruse the stamp duty, taxes, part pre-payment charges, and penalty to understand your total costs.

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Tenor of The Loan

Before taking the final plunge, revisit the tenor of the loan. A longer tenor may reduce your EMIs, but it increases your total interest payable.

For example: You withdraw a loan amount of Rs. 1 lakh at 16% interest rate.
For a tenor of 12 months, the EMI is Rs. 9,073 but total interest to be paid is Rs. 8,875.
For a tenor of 24 months, the EMI is Rs. 4,896 but total interest to be paid is Rs. 17,513.

Withdrawn Loan Amount of Rs. 1 Lakh At 16% Interest Rate
Tenor in months 12 24
Total Interest Payable Rs. 8,875 Rs.17,513
EMIs Rs. 9,073 Rs.4,896

Table1. (These figures are indicative in nature. The real values will differ)

You need to check your monthly savings, and determine a tenor that is best suited for you. Long tenor makes the loan expensive.

You should be aware of the events of default, and the remedies available. Do not fail to provide all the required documents. Failure to provide accurate information, and documents is considered as one of the cases of default.

Once you are sure of all the aspects, you can confidently sign a personal loan agreement.

DISCLAIMER:
The content of this document is meant merely for information purposes. The personal loan features mentioned in this article are subject to updation, completion, revision, verification and the same may change materially based on policy revisions. For more details, please visit our Personal Loan terms and conditions page here.
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