Bank Loan: Bank agents do not tell this thing while giving a loan, you must know it before taking a loan..


A person applies for a loan when the economic situation is weak. Banks understand this very well. They try their best to take advantage of this situation. Now the ball is in your court. It depends on you whether you let them do this or not. But, this can be done only when you know their every move.


Personal loans at the rate of 9 percent may seem cheap. However, only a few customers understand that a flat rate of interest is not the right way to look at a loan with EMI. Every EMI reduces the principal amount. Therefore, such a loan should be evaluated on the reducing rate of interest.

In reducing the rate of interest, as the loan period passes, the EMI also keeps decreasing. On the other hand, this does not happen at a flat rate. However, the same type of EMI is paid during the entire loan period. Out of the two, the first system is beneficial for the customers. But, no relationship manager mentions this.

This method also increases the cost of the loan
Advance EMI is another method through which the effective interest rate can be increased. This is an easy trick by which the total loan amount given to the customer is reduced. Under this, the customer is asked to pay two EMIs in advance. At the rate of 14 percent, the EMI of a loan of Rs 5 lakh for two years comes out to be Rs 24,000. If you pay two EMIs upfront, the total loan amount given reduces to Rs 4.52 lakh. Whereas you are charged for Rs 5 lakh.

Why do customers not pay attention?
When people take a loan, they are so worried about the amount to be sanctioned that paying two EMIs does not seem very heavy to them. They do not even worry about it. But, the truth is that due to the payment of these two EMIs, the effective interest rate of the loan increases from 14 percent to 16.6 percent. If the customer asks a question, his attention is diverted by saying that the form was deficient, some more documents are needed or some more feature is just mentioned.


The focus is on getting the application signed
This is the reason why the loan application process is done quickly. People are not given time to read or understand the clauses given in the loan document. The terms and conditions are anyway written in such a small font that the customer cannot read them. Overall, the entire focus is on getting the loan application signed.

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