The Kalamkar

Bank Loan: Bank agents do not tell these things while giving loan, you should know

When you take a loan, the agent also earns commission. This commission increases further by selling insurance. In such a situation, along with the home loan, the single premium term plan is also gradually increased. Let us know about it in detail.

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The Kalamkar News (New Delhi). A person applies for a loan when his financial condition is weak. Banks understand this very well. They try their best to take advantage of this situation. Now the ball is in your court. It depends on you whether you allow them to do so or not. But, this can also be done only when you are aware of their every move.

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Let's see an example. A call comes from the bank, “Do you want to take a personal loan?” We are offering loans at a very low rate of 9% to our valued customers. Yes, flat 9 percent per annum.

This message is a bait to trap its victim. This is one of many methods that relationship managers use to acquire customers. Agents of banks and non-banking financial companies (NBFCs) repeatedly lure innocent customers with false claims and attractive promises.

Personal loan at the rate of 9 percent may seem cheaper. But, only a few customers understand that flat rate of interest is not the right way to look at the loan with EMI. Each EMI reduces the principal amount. Therefore, such loans should be evaluated at reducing rate of interest.

In reducing rate of interest, as the loan tenure passes, the EMI also reduces. At the same time, this does not happen in flat rate. However, the same EMI is paid during the entire tenure of the loan. The first arrangement of the two is beneficial for the customers. But, no relationship manager mentions this.

If the loan is for five years, then 8 percent flat rate is equal to 15.7 percent reducing rate (see graphic). Unfortunately, very few customers understand this. They are lured by low flat rates and they easily fall for it.

For customers who understand this, bank staff have other weapons. Loan processing fee is the most favorite among these. This is a small amount, usually 1-2 percent of the loan amount, ranging from Rs 2,000 to Rs 3,000. But, these charges increase the effective rates of the loan.