These days banks are coming to customer to offer loans when required. To get the finest deal from these banks, one should compare and consider the following points before availing a deal.
- Compare EMI: You repay the loan in EMI or equated monthly installments, which includes principal as well as interest. As you pay an equal amount every month, these payments are called equal monthly installments. The EMI depends on the amount of the loan, the interest rates and the term of the loan. The interest component of the EMI would be larger during the initial months and it gradually reduces with each payment. The proportion of principal and interest components will change with time. With each successive payment, you’ll pay more towards the principal and less in interest. It is suggested that EMI amount should be not more than 40% of your monthly salary and one should consider all offers available in the market from banks as a little research, may save you thousands of Rupees.
i. Calculate your EMI here.
ii. Want to reduce EMI burden? – Extend the tenure.
- Compare Rate of interest: There are many lenders these days in the market. All banks are offering loans from nationalized bank, private bank to foreign bank. Each of the bank offers different rate of interest rates in view of the profile of the customer. So, before choosing a Bank one should compare offers from different banks and then make a wise and informative decision. And stay aware that quite a few people may mislead you by offering you high rate of interest and that too at flat rate of interest. Henceforth, its always recommended to check full detail by the banks and do compare the offered EMI, Tenure and interest rate while keeping the tenure constant as it will be easy to compare. It will help you in a rich and better analysis, which finally lead to an informative and judicious decision.
i. Choose the bank which is offering lowest interest rate.
- Tenure: This is the most important factor that we should keep in mind before comparing and considering any loan offer. This means the total time taken for repayment of loan amount with interest. This factor influence the loan decision majorly and it helps in comparing the actual EMIs offered by banks if tenure is kept constant while calculating EMI for better comparison and easy judgment.
Loan Uncle’s tip:
i. The longer the tenure, the lesser the EMI but higher will be the interest paid and vice-a-versa.
ii. Want to reduce EMI burden? Extend the tenure.
- Compare Loan Disbursal Time: Loan disbursal time is the period in which loan is processed and the customer gets the cheque from the bank. Its an important factor because there is always a reason behind taking a loan. If the opportunity of that objective is lost than its of no use. Bank calls it Turn Around Time (TAT). Disbursal time (or TAT) differs from one bank to another bank.
i. Its better to ask TAT directly from the Bank and take loan considering your urgency.
- Compare Processing Fee, Pre-Payment & Administrative Charges: When one takes loan, the loan not only carry the principal and interest, but also other charges which may include Processing Fee that bank charges to process loan file and pays it to the loan processing hubs. These charges might vary from 0.5 to 2% of the loan amount sanctioned by the bank. Apart from this, there is Pre-Payment Charges that loan carries for as a Pre-Closure charge for the Loan. One should also consider these factors before taking loan.
i. Take loan from the bank that charges no penalty for the pre-closure of loan (pay off loan before the tenure ends).
- Ensure Insurance Facility on Loan: Few banks offer insurance facility by charging a small amount as a premium over loan which is included in the EMI paid for the loan amount. By insuring your loan, one gets insured for the loan amount he has taken. If in case something went wrong or unexpected thing happens, the insured amount will be paid to the loan disbursal bank without burdening your family members.