Pre-Approved Personal Loan: A loan that looks cheap might end up being expensive; be sure to check these 5 things before taking one...

These days, many people suddenly receive a message on their mobile phones saying they are eligible for a pre-approved personal loan. No paperwork, no bank visits, and money in your account in minutes. This offer sounds incredibly easy and beneficial, especially when you need money urgently.

But this is where the risk begins. A loan that looks cheap on the surface might be expensive in reality. Low EMIs can hide high interest rates, processing fees, and stringent terms and conditions. Therefore, before saying yes to the offer, it's crucial to understand all the details. Before taking such a loan, you should definitely check these 5 things:

1. Understand not just the interest rate, but also its type.

When taking a personal loan, people first look at the interest rate, but they don't understand whether the rate is fixed or floating. Sometimes the initial rate is low, but it can change later. This significantly increases your total repayment amount. It's also important to note that the rate shown in the advertisement is not available to everyone. Your rate depends on your credit score, income, job, and past loan history. Therefore, always verify the actual rate of the offer in writing.

2. How much money will actually be credited to your account?
Often, after the loan is approved, processing fees, insurance, and other charges are deducted upfront. This can result in the amount credited to your account being less than expected. Two different loan offers might have similar EMIs, but one might have higher deductions. So, clearly ask how much net amount will be credited to your account after the loan is disbursed.

3. Check the prepayment and foreclosure terms.
Often, people don't keep the loan for the entire tenure. They close the loan early due to bonuses, salary increases, or finding another cheaper loan. In such cases, prepayment and foreclosure charges become very important. Check if there is a lock-in period, whether part payments are allowed, and how much the charges will be for early closure. Sometimes, a loan with a slightly higher interest rate but more flexibility proves to be cheaper in the long run.

4. The EMI is low, but how long is the tenure?
A low EMI sounds reassuring, but it often means a longer tenure and higher interest payments. Therefore, don't just look at the EMI amount; also consider the total amount you'll have to repay.  Find out if you can change the EMI date, reduce the tenure, or make extra payments if needed. Flexibility offers significant advantages in the future.

5. Penalties and Lender Behavior are also Important
Sometimes, an EMI payment might be missed due to technical reasons. Some lenders immediately impose hefty bounce charges and quickly report to credit bureaus, which can negatively impact your credit score. Be sure to check the penalties for late payments and the lender's customer service reputation. A personal loan is a relationship that lasts for several years, so choosing a stress-free lender is wise.

Conclusion
Pre-approved personal loans offer convenience, but it's not wise to accept them blindly. Make your decision only after thoroughly understanding the interest rate, fees, terms, and the lender's behavior. Taking a little time to compare options can ensure that what seems like an easy loan actually turns out to be the most affordable.

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