Understanding loan terms is crucial before borrowing. Key elements include the loan amount, tenure, and interest rate. Loan disbursal marks the funds' transfer, and collateral secures the loan with assets. Co-borrowers share responsibility, while co-signers assume liability. Grace periods offer payment flexibility, and processing fees cover administrative costs. The loan-to-value ratio assesses secured loan viability. Pre-payment and part payment options exist but beware of pre-payment penalties. Loan amortisation creates a fixed repayment schedule. Deferment and credit appraisal aid in challenging situations. Hard and soft credit checks impact credit scores. FOIR ensures loan eligibility by assessing disposable income.
Know the loan terms before borrowing to better understand and manage your loan
Loan amount is the money borrowed from the lender, with each type of loan having a different maximum limit
Loan tenure is the period between loan disbursement and the final EMI payment
Interest rate is the cost charged by lenders for borrowing money
Loan disbursal occurs when the approved loan amount is credited to your account
Collateral is an asset offered as security in unsecured loans, subject to seizure if the loan is not repaid
A co-borrower shares ownership and liability, impacting loan eligibility based on credit and income information
A co-signer assumes legal responsibility for loan repayment if the borrower defaults
Grace periods provide a temporary exemption from loan payments, common in student loans
Processing fees cover administrative charges incurred by lenders during loan processing
Loan to value ratio determines the maximum loan amount based on the market value of collateral in secured loans
Loan amortisation involves creating a fixed repayment schedule to calculate principal and interest payments in each instalment