Getting a personal loan is easier than ever. When urgent money is needed, approval from a bank or financial institution can feel like a relief. But hastily signing the loan agreement without careful review can lead to major financial trouble. Here’s what you need to watch out for:
🔹 1. Ignoring the Interest Rate Structure
· Many borrowers focus only on the approved loan amount, ignoring the interest rate and type (fixed or floating).
· Hidden clauses or variable rates can significantly increase repayment amounts.
· Action: Check the interest rate, EMI calculation, and total payable amount before signing.
🔹 2. Overlooking Processing Fees & Hidden Charges
· Banks often add processing fees, prepayment penalties, or late payment charges.
· Failing to read the fine print can inflate your loan cost.
· Action: Ask for a full breakdown of fees and charges upfront.
🔹 3. Neglecting the Loan Tenure
· Longer tenures reduce EMIs but increase total interest paid.
· Shorter tenures increase EMI burden but save on interest.
· Action: Choose a tenure that balances affordability and interest cost.
🔹 4. Not Reading Terms for Default & Late Payment
· Missing even one EMI can trigger penalties or affect your CIBIL score.
· Some agreements may allow accelerated repayment demands in case of default.
· Action: Understand default clauses and your bank’s grace period.
🔹 5. Overlooking Collateral & Guarantee Clauses (if applicable)
· Some personal loans may require a guarantor or collateral, which can be at risk if EMIs are missed.
· Action: Know what is at stake before signing.
🌟 Bottom Line
Rushing through a personal loan agreement can cost much more than the loan itself.
· read every clause carefully
· Ask questions about fees, interest, and penalties
· Ensure the loan matches your repayment capacity
Pro Tip: Take a day to review the agreement before signing. A small pause now can save you from a huge disaster later.
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.
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