When it comes to investments, you would always look for options that are risk free, with a promise of high returns while also beating the demands of inflation. However, when it comes to investing a loan such as a personal loan, there will always be a fear that the loan will overwhelm you and your financial requirements, leaving you with an ever bigger debt.
But not to worry, we are here to debunk some of the common misconceptions about the personal loan and how to get the best deal:
Myth #1 – Increase in the interest rate would mean inflated EMI’s
It may seem like a simple math. Whenever a bank revises the base rate, it would only mean an increase in the personal loan interest rates. Of course, it would change your overall monthly budget, especially with your EMI’s. However, this is the biggest myth. In line with the changes of the interest rate, the tenure will normally change. In fact, most banks tend to adjust the tenure with a change in the interest rate, while keeping the EMI value the same. If you want to pinpoint the exact changes in your tenure, you can always use the personal loan calculator to assist you.
Myth #2 – All interest rates offered are the best deal
While the cheapest rate for a product score you a good deal, the same cannot be said for personal loan rates. You will need to dig deeper to ensure that you are getting the best deal that will suit your needs. You will need to check out the valuation charges, processing fee and other additional rates apart from the personal loan interest rates. The initial glance over the rates may look tempting, but it may not be flexible for your requirements. The best way to avoid such a situation, is to review the personal loan features that will suit your finances and objectives before you zero in on a lender. Don’t forget to compare options before you apply for one.
Myth #3 – Borrowers should always opt for a shorter tenure
Most borrowers are under the assumption that a short loan tenure is the best route to avid any repercussions from an increase in any repo rates by the RBI. However, on the contrary, shorter the tenures would also mean higher EMI’s, which puts you in a position to face liquidity issues if you don’t manage your money carefully. Instead, try to save some funds side by side and invest in options that give you a good return at the same time. A diversified investment portfolio will help you pay off your personal loan as opposed to increasing your EMI, by reducing your tenure.