Apr 20, 2005 09:42 AM
4949 Views
(Updated Jun 21, 2006 07:04 PM)
I would like to share some tips about personal loans. I have taken one and know a bit about it.
Rate of interest: The personal loan guy will never tell you the rate of interest, he will only say that for x amount you will pay y EMI for z years. Be clear about it.
How soon can you pay the entire amount: Some banks have the criteria that you cannot pay the entire amount before 8 months or so. So check out with different banks about this.
Prepayment charges: Ask if there are any charges if you prepay the entire amount.
Principal amount deducted in each EMI: It so happens that in the initial period of loan, of the total EMI that you are paying, 70% of it will be interest and 30% deducted from principal amount. So if after a year you want to prepay, you might be paying almost the entire amount. for eg., Say you have taken 30, 000 loan at 20% PA for 3 years. So you pay a total of 48, 000 in 3 years. So your EMI comes to around 1300, out of which 70% will be interest and 30% deducted from principal amount. So after a year though you have paid a total of 15, 600 the amount deducted from principal amount is just 4800 (30%) and now if you want to prepay you have to pay a total of 30, 000 minus 4800 which is 25, 200.So if you pay it after a year you have actually paid a total of more than 40, 000.
Just calculate what the interest comes to. I guess most of the banks work this way, so look for the best deal that you can get and avoid it if you can.
Hope this helps thank you For RRC in Advance
~callmecool_in
