Introduction

Before applying through a loan app, it is crucial to understand the terms associated with a personal loan. Being aware of key definitions and conditions helps borrowers make informed decisions, manage repayments efficiently, and avoid unexpected charges during the loan tenure.

Key Terms to Know

Principal Amount

The original amount borrowed, which needs to be repaid along with interest.

Interest Rate

The percentage charged on the principal, either fixed or floating, which determines EMI size.

EMI (Equated Monthly Installment)

The fixed monthly payment that includes both principal and interest components.

Fees and Charges

Processing Fees

Upfront charges for loan approval and processing.

Prepayment or Foreclosure Charges

Fees applicable if you repay the loan before the agreed tenure.

Late Payment Penalties

Additional charges incurred for delayed EMI payments.

Loan Tenure and Repayment

Short vs Long-Term Tenure

Shorter tenures reduce interest but increase EMI, while longer tenures lower EMI but increase total cost.

Flexible Repayment Options

Some lenders allow partial prepayment or EMI restructuring to manage financial stress.

Credit Score Impact

Timely repayments positively affect your credit score, while defaults can harm it.

Conclusion

Understanding important terms before taking a personal loan ensures smooth processing and repayment. Using a reliable instant loan app helps track EMIs, understand interest implications, and manage repayments effectively, making borrowing convenient and stress-free.