Need emergency money now? Avoid personal loans with advance EMIs

It reduces the loan amount disbursed, but the borrower pays interest on the higher amount

* Personal loans can be a saviour in an emergency, and these days it's easier to get one. Most banks provide a pre-approved personal loan, which customers can avail with a few clicks, within seconds

* But a personal loan comes with a lot of restriction. Lenders also find ways to charge borrowers a higher interest rate than the one mentioned in the contract

* Many lenders don't allow part-payment or foreclosure for the first 12 months of the tenure. After that, they charge between 2 per cent and 5 per cent of the part-payment amount or the outstanding principal

* Be wary of banks that charge advance equated monthly instalments (EMI). Advance EMIs are deducted from the loan amount sanctioned. It essentially means, the bank has reduced the loan amount but charged interest on the full amount

* Similarly, the bank may keep rate low but processing fee high, which increases the overall interest rate

* Before taking a personal loan, always check if there are other ways you can raise money at cheaper rates, such as via top-up home loan, overdraft facility on a fixed deposit, and so on