Personal loan dilemma


I need a loan of Rs. 5 Lakhs and i am getting a PL offer at 10% flat rate for a 5 year tenure. Is it a good option?


When other banks are offering Pl’s at 16-17% getting a loan for 10% can be quite lucrative. But don’t forget it is the flat rate method.

You pay an interest of 10% on Rs.5 Lakhs which comes to Rs. 50,000. If you take Rs, 5 Lakhs for 5 years every year you will have to repay Rs. 1 Lakhs as principal plus Rs. 50,000 as interest. So this is an EMI of Rs. 12,500.

So over a 5 year period you are repaying Rs. 7.5 Lakhs which comes to an interest rate of 17.5%. So do your math and do not get carried away by 10% flat rate.


Hi Nisa,
You must always compare the rates offered by other lenders before zeroing in one. Also, you must understand the terms and conditions of the loan before you sign up. The first question you must ask is, ‘How is the 10% calculated?’ If it is on the outstanding balance, then, this loan is acceptable. However, if the interest will remain the same throughout the tenure, you might be better off with a floating rate. Always calculate the total interest that needs to be paid at the end of the term to understand whether the loan is a good deal. The lower the interest outgo, the better. Click here if you’d like to compare loans across lenders on BankBazaar [Insert PL link] and here’s an EMI calculator to help you calculate your EMIs and interest -
BB Expert