With banks and non-banking
financial companies (NBFCs) receiving huge funds post the demonetization drive,
the credit market is buzzing with attractive personal loan schemes. The
interest rates being offered by the lenders are highly competitive and the
lenders have also relaxed the terms and conditions for disbursing loans. So, it
would not be wrong to say that these are the best times for the borrowers to
apply for personal loans. Nevertheless, the borrower needs to be aware of the
pitfalls the scenario presents and follow some golden rules to bag the best
deal.
Choose the lender
carefully
While it is true that lenders
are offering loans at attractive rates, one must not fall for the one that has
the lowest rate. You may be flooded with promotional messages and emails about
different loan schemes but you should take the call only after thorough
analysis of the different schemes. Also, it may seem convenient to apply for a
loan from a bank where you already have an account, but it is not always a wise
step. You may miss out on better deals available at other banks. So, always
check out the different schemes and do a thorough research at the loan
comparison websites before finalizing a particular scheme.
Do not fall for flat rate
Figure out the actual
interest rate that you will be paying on the personal loan before saying yes to
a scheme. Many a time, customers fall prey to the tricks of the banks wherein
the latter lure the former with flat rate of interest which turns out to be
pretty lower than the actual interest rate that the borrower pays. The flat
rate misleads the borrower as it does not include the reduction in the
principal loan amount that occurs as a result of the EMI paid every month by
the borrower. So, do not make a decision based on the flat rate and always
calculate the actual interest rate that would be payable on the loan.
Do not go for advance EMIs
Advance EMIs are another
trick that is applied by the banks to make the customers pay a higher rate than
what they opt for in the scheme. In the advance EMI scheme, the first EMI is paid
in advance to the bank and the bank disburses the principal amount minus the
first EMI amount and the processing fee to borrower’s loan account. It has been
seen that the annual percentage rate (APR) of the loan i.e. the total cost of
the loan is usually higher in an advance EMI scheme.
Avoid schemes with 0% EMI
Many lenders offer personal
loan schemes with 0% EMI to attract customers despite the RBI’s prohibition. It
is a clever strategy on the part of the banks to get customers to apply for
loans but in reality the loan is not interest-free. The banks compensate for
the 0% EMI with high processing fees and other charges that ultimately lead to
the borrower paying more than what they would have at a normal EMI rate.
Check out the hidden
charges
Apart from the processing fee,
there are other charges that lenders push towards the customer. So, it is
necessary to read the fine print and find out the other hidden charges so that
one is able to compare and select the best personal loan scheme.
Learn about the
foreclosure rules
Many banks pose penalty on
the borrowers in case they pay off the loan earlier. The foreclosure charges
are applied by many banks and thus, you should get an idea about the same. If
you feel that your cash flow might increase then you should opt for loans that
have lesser foreclosure charges.
Do not approach multiple
lenders
The lenders check the credit
score of borrowers when they apply for loan and hence, when one applies for
loan with multiple lenders, the credit score becomes available to all of them.
This brings down the credibility of the borrower and the score may also go
down. So, one should avoid it and use the online loan comparison tools for
comparison purpose.
If you wish to plan a new loan or manage your existing loans, visit Findvise or download the app. Findvise is a professionally managed robo advisory platform, that will analyze your aspirations and finances in the most scientific way and help you to attain your financial goals.
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