Personal loans can help you take care of your financial needs. These include higher studies, medical emergencies, weddings, renovation, and vacations. However, before signing on the dotted line, there are certain things you need to ensure.
Features of personal loan
You should read the final agreement, in order to confirm that all the features of the personal loan that you had read, and discussed with the advisor, are covered. For example, some NBFCs provide a flexible loan facility, which allows you to borrow as per your requirement without using the entire sanctioned limit. Interest is applicable only on the borrowed sum.
The interest rates and tenor should match what you discussed with the lender. The Personal Loan EMI Calculator, which you can use to calculate the EMIs, is indicative. Before signing the agreement, check what your actual EMIs will be.
Flexi personal loans offer multiple withdrawals. In Flexi loans, the loan limit decreases every time you withdraw but does not increase when the principal is repaid. In Flexi interest-only loans, the loan limit increases when the principal is repaid. You need to be sure that there is no limiting clause for the option you have chosen.
Fees and Taxes
You need to read the fine print to know all the fees and add-on charges to avoid hidden costs. The loan document lists general terms and conditions. Examine the stamp duty, taxes, part-prepayment charges, and penalties to understand your total costs.
The 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 the total interest payable. For example: You withdraw a loan amount of Rs. 1 lakh at 16% interest.
For a tenor of 12 months, the EMI is Rs. 9,073, but the total interest to be paid is Rs. 8,875.
For a tenor of 24 months, the EMI is Rs. 4,896, but the total interest to be paid is Rs. 17,513.
|Withdrawn loan amount - Rs. 1 lakh at 16% interest|
|Tenor in months||12||24|
|Total Interest Payable||Rs. 8,875||Rs. 17,513|
|EMIs||Rs. 9,073||Rs. 4,896|
(These figures are indicative in nature. The real values will differ)
You need to check your monthly savings and determine a tenor that suits you best. A long tenor makes the loan expensive.
You should be aware of the remedies available in the event of a default. Ensure you provide all the required documents. Failure to provide accurate information and documents is considered a case of default.
Once you are clear on all aspects, you can confidently sign a personal loan agreement.
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