Everything follows the rule of being ‘Grey’, even Loans. If there are advantages, there certainly are some disadvantages of taking personal loans. Let us know what are the cons of taking this emergency loan online or through a bank.
If a personal loan is taken through a credit card, the chances are that upon a default the arrears accumulate and the loan increases exponentially. This means, that since the loan is taken through credit card, the amount to be repaid each month is fixed. However at some point in time, if you fail to pay the installment, the late fee and the defaulting fee garners a lot of interest for the borrower.
High Interest Rates: If you plan to take a personal loan, make sure you do that directly from a financial institution and not through a credit card loan. This may levy interest rates that are high. There are other loans such as home equity loans that can be taken for a home loan, or any other city which offer a low-interest rate. So look for alternatives before vesting your interest in Personal loans.
Penalties: After you take a personal loan for a particular tenure, even if you want to repay it earlier than the stipulated time, you will be asked to pay a prepayment penalty. Also, failing to pay the EMI’s lead to legal action by the banks. Hence, if you prepay, you pay penalty and if you miss, then you obviously pay the penalty. So be careful when you chose a tenure to repay the Personal Loan. Besides, if you once lock the tenure of repayment, you do not have the authority to change the same.
GST Rate: A GST Rate of 18% is also levied on the instant personal loan. This makes the interest even soar higher.
Scammers: There are numerous not so renowned NBFC’s that vanish overnight after charging a processing fee and then not processing the loan. This leads to distrust and a waste of time.
It is imperative to be meticulous and calm before you vest your interest in taking a personal loan. Weigh your reasons and then move forward to the decision of opting for loans.