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Five Essential Things to Check Before Signing a Personal Loan Agreement
M
Moneycontrol•07-10-2026, 12:04
Five Essential Things to Check Before Signing a Personal Loan Agreement
- •Review the Key Facts Statement provided by lenders to compare actual borrowing costs beyond just the advertised interest rates.
- •Balance your monthly EMI and repayment tenure to find an option that is affordable without accumulating excessive total interest.
- •Pay close attention to hidden fees, including processing charges, late-payment penalties, and foreclosure costs.
- •Look for loan flexibility that allows easy part-prepayments in case your financial situation improves during the tenure.
- •Compare final sanctioned offers based on your personal credit score and income rather than promotional advertising rates.
Key Questions Answered
The RBI requires lenders to provide a Key Facts Statement that details important information like the loan amount, interest rate, tenure, and applicable charges, which helps borrowers compare offers side by side.
A lower interest rate can be misleading because processing fees, prepayment costs, late penalties, and repayment tenure can significantly increase the overall cost of the loan.
A longer repayment period makes monthly installments look attractive, but it results in paying interest for a longer duration, whereas a shorter tenure avoids extra interest but might strain monthly budgets.
