Introduction
Getting a loan can feel exciting — whether it’s for a home, business, or urgent need. Banks often promote low interest rates and quick approval, but what you see in ads is not always what you end up paying.
Hidden charges and fine-print terms can increase your overall cost, and many borrowers discover this only after signing the agreement.
Let’s uncover three important things banks rarely tell you before giving a loan, so you can borrow smartly and avoid financial surprises.
1. The “Low Interest Rate” Isn’t Always What You Pay
Those attractive 8%–9% interest rates are usually “teaser rates” meant for customers with excellent profiles.
Most borrowers end up paying higher rates depending on their eligibility.
Why It Happens
Banks calculate your actual rate based on:
- Credit score and repayment history
- Employment type
- Loan amount and duration
- Debt-to-income ratio
This is why two applicants at the same bank may receive different interest rates.
Hidden Charges That Add Up
Beyond interest, you may face:
- Processing fees (0.5–2%)
- Valuation/documentation charges
- Insurance add-ons (often sold as mandatory)
These extras quietly increase the total cost of the loan.
How to Avoid This Trap
- Ask for the APR (Annual Percentage Rate).
- Compare offers from multiple banks or NBFCs.
- Maintain a 750+ credit score for better rates.
Jisha Finserv helps borrowers compare real-time loan options with complete transparency — no hidden fees.
2. Prepayment Isn’t Always Free
Paying off your loan early seems wise, but many loans include prepayment penalties.
Why It’s a Problem
Borrowers often get shocked when banks impose:
- 2–4% prepayment charges
- Foreclosure fees for closing the loan early
While floating-rate home loans have no RBI-allowed penalty, personal loans, business loans, and fixed-rate loans can still include charges.
How to Avoid This Trap
- Read prepayment terms before signing.
- Check if your loan is fixed or floating.
- Select lenders offering zero prepayment fees.
Jisha Finserv partners with lenders that provide flexible repayment options, helping clients close loans early without extra cost.
3. Your Credit Score Can Drop Even After Loan Approval
Most borrowers assume their credit score matters only during application.
But your score is tracked every month until the loan is closed.
Why It’s a Problem
Banks report your behavior to CIBIL, Experian, and CRIF monthly. Your score can drop due to:
- Missing even one EMI
- Taking too many loans
- Closing old credit cards (reduces credit age)
How to Avoid This Trap
- Pay EMIs on time (auto-debit recommended).
- Avoid multiple loan applications.
- Keep credit utilization below 30%.
- Check your credit report every quarter.
Jisha Finserv offers free credit health checks to help borrowers improve their scores.
Bonus Tip: Existing Customers Don’t Always Get the Best Deal
Banks often give better rates to new customers, not existing ones.
Before renewing or taking a top-up loan, compare multiple lenders — switching may save you more money.
Key Takeaways
- ✔ Don’t rely on advertised rates — check the APR.
- ✔ Watch for hidden charges and prepayment rules.
- ✔ Maintain a strong credit score even after approval.
- ✔ Compare lenders before finalizing your loan.
Conclusion
Loans help you achieve goals and handle financial needs, but understanding the fine print is crucial.
The more informed you are, the better financial decisions you’ll make.
At Jisha Finserv, we believe in transparent, stress-free lending.
Whether you need a personal, business, or home loan, our experts guide you clearly and honestly at every step.
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Ready to explore clear and transparent loan options?
Contact Jisha Finserv today for a free consultation and discover smarter, simpler ways to borrow.
FAQs
Q1. What’s a good credit score for loan approval?
A score above 750 increases your chances of approval and better rates.
Q2. Can I prepay my loan anytime?
Some loans allow free prepayment; others charge penalties. Always check the agreement.
Q3. How can I avoid hidden fees?
Ask for the APR and carefully read all terms. Jisha Finserv can help review your documents.
Q4. Do banks report EMI performance?
Yes. Every EMI — paid or missed — is reported monthly to credit bureaus.
Q5. How can I improve my credit score?
Pay EMIs on time, reduce credit usage, and review your credit report regularly.
