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Right to Information – How to check EMI of Loans

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Right to Information – How to check EMI of Loans
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Are You worried about EMI even after having paid all Equated Monthly Installments of Bank Loans? 
Even after regular repayment of personal loans, vehicle loans, consumer loans, home loans and educational loans the banks and lending institutions inform the borrower that their loan is still outstanding even after the full term of repayment of all EMI’s as per Bank’s instructions at the time of disbursement of the loan amount. The borrowers get confused and are not in a position to reconcile. This article explains the reasons for the confusion of the borrowers on the one side and recovery machinery of the banks and financial institutions on the other side. The borrowers need to know about the following basics of EMI or equated monthly installments;
  1. Whether the rate of interest is fixed or floating.  If the rate of interest is floating then how can you expect the EMI to remain constant and mind it that there is no concept like a fixed rate of interest as it is subjected to reset clause by all the banks and term lending institutions? Now the even new concept of benchmark prime lending rate, BPLR, which is also subject to change can vibrate the EMI of the loan taken by you.
  2. Whether the rate of interest is simple or compounded. If simple then it is OK but if it is compounded then whether it is compounded yearly, half-yearly or quarterly. Presently all banks are compounding their interests monthly that is to say that on last date interest for the current month is applied and interest for next month is applied on the balance after adding the interest applied for the current month. Check with the Bank or lending institution about the method of compounding while fixing the EMI of the loan.
  3. Whether there was any gestation period or moratorium period. If yes inquire about the interest applied during such gestation or moratorium period. If it was to be paid by the borrower, have you paid it? If not, then ask if such interest has been loaded in principle while fixing the EMI.
  4. Whether any charges like inspection charges, advocate fees, architect or valuers fees or cost of insurance is being debited to your loan account of other accounts like saving or current or cash credit. If it is another account then there is no problem and if it is debited to your loan account without having been paid by you the same day, it will have a money multiplier effect as due to even small component of interest on such charges will make your loan account irregular forcing penal provisions of charging penal interest getting activated automatically. Ask the bank to recover such charges from other account or inform you through SMS so that it can be paid on the same to avoid penal interest which will go on multiplying and disturbing the EMI. At a later stage, it may become troublesome for you and complicated even for the banks to rectify as it will involve tedious IT solutions.
  5. Do you know that smart banks like HDFC, ICICI and even almost all banks prefer not to disturb the EMI on change or increase of the rate of interest resulting into increase in total Term of the Bank Loan?

To deal with the situation, the customers have to be smarter than the Bankers and to protect your interests Read the full article and keep yourself ahead of your lender.

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