Several companies in India are offering loans very aggressively. While interest rate may appear to be the first thing on your checklist while taking a loan, it isn’t the only important factor. Following are the factors that need to be checked.
Interest rate:
Before selecting a personal loan one will have to compare the interest rates that various banks are offering and accordingly go with the best personal loan. One can check the interest rates here.
Processing fee:
Interest rate is not the only thing making your loan expansive, there is something which is known as the processing fee and this is something that people do not pay attention to, it can be as low as .25% of the loan amount to 6% or even higher, making your loan extremely expensive. At times companies do not highlight this and applicants are also not aware of this. For example a company would come up with an offer of personal loan at 8% which would appear to be very reasonable, but at the same time the applicant will not check the processing fee, which would be 7% making the loan really expensive.
Pre-closure charges:
If the borrower wants to close a particular loan by paying it in full there is a charge levied by the bank on that. One should always go for a loan which has a minimum or no pre closure charge. Like prepayment there is a lock-in period for pre closure as well. So, minimum the loc-kin better the loan.
Prepayment charges:
Like pre-closure one can also pay a portion of the loan before the scheduled time. Some banks charge a good amount of money as prepayment charges and some do not. Hence, one needs to go with the bank charging a minimum amount as prepayment. At the same time some banks also have a lock-in period of 12 months or so and one can not close an account within that period.
Late Payment Charges:
Banks also charge late payment if you were not able to deposit your EMI on time, this can be anything between some small amount like INR 400 to 5% of the EMI. This penalty is also compounded if you miss it for a few months. If you foresee a possibility of missing an EMI go for a bank which has less late payment charges, but people who think that they have credible sources to pay the EMIs can ignore this factor as at times companies giving relaxation in late payment charges may have increased interest rates.
