Things to Know when Shop­ping for a Loan

Consumer Voice - - Loans For Two-wheelers -

In­ter­est rates In­ter­est rates are the ref­er­ence point that most peo­ple use when com­par­ing loans. And why not? The in­ter­est rate is go­ing to play a big part in de­ter­min­ing the cost of your loan. How­ever, be care­ful to not fall into the trap of think­ing that the rate is the only as­pect to con­sider. Fees Fees di­rectly im­pact on your cost of bor­row­ing. They are not dis­played as promi­nently as in­ter­est rates but you need to find out what fees ap­ply and how much they are be­fore pro­ceed­ing with a loan. It’s bet­ter to be scep­ti­cal about at­trac­tive head­line rates only to find out later that the deal in­volves high set-up and on­go­ing ac­count-keep­ing fees. Loan se­cu­rity Most loans in­volve the lender us­ing the two-wheeler that you buy as se­cu­rity. This means that the bank or fi­nance com­pany have some rights over the two-wheeler which could al­low them to re­pos­sess it if you were to break your agree­ment and miss your loan re­pay­ments. When it comes to sell­ing or trad­ing in your ve­hi­cle, a se­cured type loan needs to be paid off in full be­fore the sale can be fi­nalised. If you want the flex­i­bil­ity of an un­se­cured loan, ex­pect to pay a higher rate. Pre­pay­ment If you think that you may want to pay ex­tra off your loan or if you’re plan­ning to pay the loan off early with a lump sum, check in the be­gin­ning that your loan al­lows you to do this. If your loan does pro­vide this flex­i­bil­ity, check out if there are there any costs as­so­ci­ated with it. Pre­pay­ment penal­ties vary from one fi­nan­cial institution to an­other, and of­ten, even from loan to loan. Th­ese penal­ties are ei­ther charged at a flat rate, or at a cer­tain num­ber of months’ in­ter­est. Even if the loan con­tract does stip­u­late a pre­pay­ment fee or penalty, a loan owner must first com­pare this amount against the over­all in­ter­est they will save in terms of in­ter­est. Also, in some in­stances, the pre­pay­ment is made pos­si­ble af­ter a min­i­mum stip­u­lated pe­riod of loan own­er­ship. To make sure they are able to cap­i­talise on th­ese pro­vi­sions, bor­row­ers must first care­fully read their con­tract or talk to their bor­rower at length.

We chose 13 banks/non-bank­ing fi­nan­cial com­pa­nies (NBFCs) to study their loan prod­ucts on pa­ram­e­ters such as max­i­mum loan, mar­gin, pro­cess­ing charge, rate of in­ter­est, time taken for sanc­tion, and re­pay­ment. We gave the high­est weigh­tage (20 points) to con­sumer feed­back, based on which the most im­por­tant vari­ables were short­listed.

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