Stop! Don’t Apply for a Personal Loan Until You Read These 7 Shocking Facts
Stop! Don’t Apply for a Personal Loan Until You Read These 7 Shocking Facts
Every day, thousands of people click “Apply Now” on personal loan ads, thinking they’re solving their money problems. Most end up paying lakhs extra and damaging their credit score — without even realizing it.
Before you become one of them, know these 7 hard truths that banks and NBFCs will never advertise:
1. “Pre-approved” almost always means “you’re getting a higher rate”
That proud “Congratulations! ₹10 lakh pre-approved at 11.99%” message? It’s usually the bank’s worst rate. The same bank will quietly offer 9–10.5% if you walk into the branch, show salary slips, and negotiate. Thousands accept the online rate and lose ₹80,000–₹2 lakh in extra interest over 5 years.
2. Processing fee + GST can silently add 6–8% to your real cost
A ₹5 lakh loan with 2% processing fee = ₹10,000 + ₹1,800 GST. Some lenders add “documentation,” “legal,” and “verification” charges. Suddenly your 12% loan costs almost 19–20% in the first year alone.
3. “Zero foreclosure” is rarely zero
Most banks say “No prepayment charges after 12 EMIs.” Dig into the fine print and you’ll find 2–4% foreclosure penalty if you close the loan in years 2–4. A ₹3 lakh early repayment can cost you ₹9,000–₹12,000 in hidden penalties.
4. Every application — even rejected ones — hurts your CIBIL score
Each personal loan enquiry triggers a hard inquiry. Three applications in two months can drop your score by 50–100 points. The lower score then forces future loans (home, car) to be costlier or rejected.
5. Personal loans are the second-most expensive debt in India
Only revolving credit-card debt (40–48%) is worse. Yet millions use 18–24% personal loans to clear 40% credit-card dues, then struggle with the new EMI. Proper debt-consolidation or balance-transfer options at 9–12% exist — but banks rarely push them.
6. Loan insurance is often forced and overpriced
Many lenders make “loan protection insurance” compulsory. The 1–3% premium gets added to your loan amount — meaning you pay interest on the insurance too. ₹10 lakh loan easily becomes ₹10.25–₹10.30 lakh before the first EMI.
7. 90% of borrowers never compare and lose ₹1–3 lakh
A 2024 RBI study showed borrowers who compared 4+ lenders saved an average of ₹1.4 lakh on a ₹10 lakh, 5-year loan. Yet most people apply only to their salary-account bank and accept whatever rate is offered.
Protect yourself — 5-minute checklist before you apply
- Check your latest CIBIL score (free annually on official site)
- Compare live offers from at least 5 banks/NBFCs (BankBazaar, Paisabazaar, or direct websites)
- Calculate total repayment (principal + interest + all fees + insurance) — not just EMI
- Ask for processing-fee waiver and 0.5–2% rate reduction — most banks agree
- Read the loan agreement completely, especially prepayment and insurance clauses
Bottom line: Personal loans can be lifesavers when used smartly, but blind applications are financial suicide. The 30–60 minutes you spend comparing and negotiating today can easily save you ₹1–3 lakh and protect your credit score for years.
Share this with anyone about to take a personal loan — you might save them from years of regret.
