A personal loan is among the best credit tools when it comes to flexibility. The borrowed funds can be used for a wide range of financial obligations. The interest rate offered is also lower than its close alternatives like a personal loan on a credit card. The best thing about a personal loan is that it doesn’t demand any collateral from the borrowers. Reputed and modern financial institutions like Fullerton India offer easy personal loans that are highly affordable. However, not all loan providers have such a customer-friendly approach. Therefore, you need to be mindful of the red flags. Here are some essential factors to consider.

1. High-interest rate 

The first and most important thing to check while choosing a loan provider is the interest rates. A very high-interest rate is a major red flag as it will increase the total due amount and EMIs. It is recommended to compare the interest rates from multiple providers and use a personal loan EMI calculator online. The cost of borrowing money should not be very high and out of your budget. Maintaining a good credit score can also help you get favourable interest rates. 

2. High processing fee and other upfront charges

Many lenders charge a minimal processing fee for loan applications, and some may even add other upfront expenses. You should not borrow money from lenders with an upfront charge and a very high processing fee. 

3. Prepayment penalties 

Prepaying a loan can save you significant interest charges. However, some lending institutions charge a prepayment penalty. Always check for the prepayment terms & conditions and choose a lender that offers penalty-free prepayment charges. 

Keep an eye out for these red flags, and then choose wisely.

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