Know The Hidden Charges of Personal loan
APR : The annual percentage rate ( APR ) advertised by various lenders are often inclusive of additional charges levied by them under various pretexts, but the borrowers are liable to be confused in the absence of clarity of the terms and conditions. The lenders will insist on the additional charges as a check against the possible risk involved in the business. The credibility and the past record of the borrower, if any, play an important role in fixing the APR by the lender.EARLY REPAYMENT CHARGES: Even though early repayment is beneficial to the borrower, as it should save interest charges , the lenders generally discourage the same. They count on the interest charges accrued on the principal amount. As such many of the lenders charge penal interests to discourage the borrowers from early repayments. In response to the borrower’s reluctance to accept such a term, many lenders scrapped this additional levy. So it is better to verify and make sure the interest charges as well as other terms and conditions before borrowing money.
PPI: The payment protection insurance is a beneficial instrument, but it is an expensive option. The PPI scheme is also having many conditions under which it is operative. So it is essential for the borrower to understand and clear doubts before taking out PPI on their borrowed amounts.
Another disadvantage is that many lenders charge the full cost of insurance to the personal loans, making the borrower pay the interests on both the sum borrowed and on the insurance cover. So it is better to take out PPI through independent insurance service providers, who charge reduced premium.