Do you often receive messages on your phone about personal loans with low interest rates? If yes, then it is very important for you to know a few things before accepting any such offer. Many times people make up their mind to take a loan immediately after seeing the interest rate of 10-11%, but when you go deeper into it, then you come to know that this ‘cheap’ offer is actually a very expensive deal. Even a difference of 1-2% in the interest rate has a big impact on the pocket. Let us understand this with a small example. Suppose, you take a personal loan of Rs 5 lakh for 3 years at an interest rate of 11%. You will be surprised to know that in 3 years you will pay approximately Rs 89,296 as interest on this loan. Now if this interest rate is 13%, then you will have to pay Rs 1,06,491. This means that just by increasing the interest rate by 2%, more than Rs. 17,000 goes out of your pocket. Banks charge more than just interest. Experts say that while taking a loan, people often pay attention only to the interest rate. They completely ignore other expenses like processing fees and prepayment charges. Processing Fee: Most banks or NBFCs charge a processing fee on personal loans, which can range from 1 to 2 percent of the loan amount. You do not have to pay this money separately, rather the bank deducts it at the time of giving the loan and sends the remaining amount to your account. Meaning, if there is a processing fee of Rs 10,000 on a loan of Rs 5 lakh, then only Rs 4,90,000 will come into your account. Prepayment Charge: Even if you want to close the loan by prepaying it, you may have to pay a penalty, which is called prepayment charge. Your credit profile decides the interest rate. Banks or NBFCs do not give loans to anyone at the same interest rate. Before giving a loan, they look at your credit profile, which includes your credit score, your job record and past loan repayment history. If all this is good, then you can get a loan at a lower interest rate. But if your profile is weak, banks offer you loan at higher interest rates. Many times people take expensive loans out of compulsion due to urgent need of money and banks take advantage of this. Ask these questions to the bank before saying ‘yes’ to the loan. Next time whenever you get a personal loan offer, do ask some important questions before saying yes: How much is the processing fee? What is the percentage of processing fee on the loan and can it be reduced? Are there any other hidden charges? Penalty on early repayment of loan. Will it be applicable? If you want to close the loan prematurely, how much prepayment charge will you have to pay? Can the processing fee be waived off? Sometimes banks waive off the processing fee for customers with good credit history, so do not hesitate to ask about it. Remember, it is important to be prudent while taking a personal loan rather than being hasty.