Stories
Avoid These 5 Personal Loan Traps That Can Cost You Dearly
M
Moneycontrol•27-09-2026, 11:30
Avoid These 5 Personal Loan Traps That Can Cost You Dearly
- •Don't choose a loan based solely on the advertised interest rate; consider the overall annualised cost and fees disclosed in the Key Facts Statement (KFS).
- •Avoid borrowing more than you need; every extra rupee borrowed incurs interest, and a longer repayment period increases the total amount paid.
- •Resist stretching the loan tenure just to reduce EMI; a shorter tenure, though with higher monthly payments, can significantly lower the overall interest burden.
- •Always check prepayment and foreclosure conditions before signing, especially if you anticipate early repayment through a bonus or inheritance.
- •Never treat late payments as minor; they can damage your credit score and lead to higher costs or difficulty in securing future loans.
Key Questions Answered
Borrowers should avoid choosing a loan based only on advertised interest rates, borrowing more than needed, stretching the tenure just to lower EMIs, ignoring prepayment or foreclosure rules, and treating late payments casually.
The RBI requires lenders to clearly disclose the annualised cost, APR, and relevant charges through the Key Facts Statement (KFS), including reasonable penal charges linked directly to non-compliance with loan terms.
Every additional rupee borrowed attracts interest, and choosing a longer repayment period can significantly increase the total amount repaid even if the monthly EMI appears comfortable and manageable.
