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A personal loan is an easily available loan, so it is called an emergency loan. When you need money, but are unable to arrange the money, then you can arrange the money through a personal loan. But many people take personal loan without thinking and later regret when they have to pay a hefty EMI. If you are also thinking of taking a personal loan, then definitely pay attention to these 6 things, so that you can get an idea of ​​its profit and loss and you do not have to regret your decision later.

1. High Interest Rate

Personal loan is an unsecured loan, that is, you do not have to mortgage any property for it. Due to this, the risk is high for the bank and they charge a very high interest rate to compensate for it. This rate can usually range from 10% to 24% or even more, which is much higher than a home loan or car loan.

2. Negative Impact on Credit Score

If you fail to pay your EMI on time, your credit score (such as CIBIL score) falls very fast. Having a bad credit score can make it very difficult for you to get another loan (such as a home loan or car loan) in the future.

3. No Tax Benefits

You get income tax exemption on the interest paid on a home loan or education loan. But you usually do not get any tax benefits on personal loans. This means that you pay the entire amount from your pocket and are not able to save any tax.

4. Risk of Debt Trap

Personal loans are easily available, due to which people sometimes take it for unnecessary expenses (such as holidays, expensive gadgets). But if it is not managed properly, then the person starts taking another loan to repay one loan and gets trapped in the debt trap.

5. Additional Fees and Hidden Charges

Not only interest, many other charges are also associated with personal loans, such as -

Processing Fee: This can be from 1% to 3% of the loan amount.

Pre-payment Charges: If you want to repay the loan before time, the bank can charge you a penalty.

Late Payment Fee: There is a heavy penalty for paying EMI late.

GST: GST is also levied on all these charges, which makes the loan more expensive.

6. Short Repayment Tenure

The repayment period for a personal loan is usually short. In most banks, it is 1 to 5 years. However, in some places, it can be 7 years as well. A short period means that your EMI amount will be very high, which can put pressure on your monthly budget.