Need money? Avoid personal loans with advance EMIs, high processing fee

Understand difference between flat and reducing rate of interest

• A personal loan can be useful during emergencies. Lenders approve it quickly, don't ask for collateral, and there are no questions asked on the end-use of the funds
• There have been cases of bank executives misleading borrowers by mentioning the flat rate of interest instead of reducing rate. The former makes the interest rate appear lower
• A loan at 21.2 per cent reducing interest rate is the same as one offered at 12 per cent flat rate. The Reserve Bank of India (RBI) doesn't permit banks to provide loans on a flat rate of interest
• There are chances that the borrower may have a pre-approved loan from his bank. Though it is not a bad idea to consider, he might lose out on the best offers if he fails to shop around
• Before applying, check your credit score. If your score is not good, your application could be rejected or you may have to pay higher interest rates
• Don’t apply for a personal loan with too many lenders. After you apply for a loan, the first thing lenders do is check your credit score. A high number of queries hurts your credit score
• Understand the fine print and check processing fees. Some lenders don’t allow you to make pre-payment or foreclose the loan for the first 12 months. Also, a higher processing fee may increase your overall cost of borrowing 
• Avoid lenders that charge you an advance or upfront equated monthly instalment. It is another trick that increases your cost of taking a personal loan
• Opt for the shortest possible tenure as this will reduce your interest outgo