Personal Loan Tips: Not just the interest rate, these 'hidden charges' make your personal loan expensive..

Whenever you apply for a personal loan, the first thing you notice is the interest rate, such as 10% or 12%. You think this alone determines whether the loan is cheap or expensive. But the real story doesn't end there. The truth is that the true and full cost of the loan is hidden behind that small rate, which we often overlook. Making a decision based solely on the interest rate can be a big mistake.

Suppose you're taking out a personal loan of ₹5 lakh for 3 years. If you get the loan at 11%, you'll have to pay approximately ₹89,296 in interest. But if the bank charges 13%, this interest rate will jump to ₹1,06,491. You see, just a 2% higher interest rate puts an additional burden of ₹17,195 on your pocket. Therefore, even a small difference in the interest rate significantly increases your total cost.

Banks or NBFCs review your entire profile before granting you a loan. If you have a good salary, a stable job, and a strong credit score (i.e., you've repaid past loans on time), you're a low-risk customer. In this case, you can certainly get a loan at a lower interest rate. Maintaining a good profile also makes your loan cheaper.

In addition to interest, personal loans also have some hidden charges that are important to know about. If you don't know about them, you could be in for a shock later. Processing fee: This can range from 1-3% of the loan amount and is deducted upon loan disbursement. Prepayment charge: Banks charge this as a penalty if you want to repay the loan early. Late payment charge: If you miss or delay paying your EMI in any month, you could face a hefty penalty.

Before taking out a loan, don't just look at the interest rate, but also the Annual Percentage Rate (APR). This rate includes interest, processing fees, and all other relevant charges. This will give you a clear idea of ​​the total cost of the loan. Also, be sure to use an EMI calculator and check if you can prepay the loan without incurring significant charges.

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