Renewing a loan can be a great opportunity to reduce EMIs, negotiate better interest rates, and extend repayment periods. However, many borrowers make avoidable mistakes that end up costing them more in the long run. Knowing these pitfalls can help you save money and manage your finances efficiently.
1. Not Comparing Interest Rates
Many borrowers renew loans automatically with the same bank without checking competitors’ offers.
Mistake: Missing out on lower interest rates can increase your total interest payments.
Tip: Compare rates from multiple banks and NBFCs before renewal.
2. Ignoring Prepayment or Foreclosure Charges
Some borrowers overlook prepayment fees or foreclosure penalties.
Mistake: Paying unnecessary charges reduces the benefits of a new loan or refinancing.
Tip: Check all associated fees and calculate if refinancing or part-prepayment saves money.
3. Extending Tenure Without Calculating Total Cost
Extending loan tenure reduces EMI but increases overall interest outgo.
Mistake: Borrowers focus only on lower EMIs without considering the higher total payment.
Tip: Use an EMI calculator to evaluate total cost before extending tenure.
4. Overlooking Loan Terms and Conditions
Borrowers often skip reading renewal terms, missing clauses that may affect interest rate resets or penalties.
Mistake: Unfavorable terms can lead to unexpected charges or conditions.
Tip: Carefully review the fine print and clarify doubts with the lender.
5. Not Updating Credit Score and Financial Profile
Banks offer better renewal terms to borrowers with good credit scores and updated income proof.
Mistake: Ignoring this can result in higher interest rates or rejection of better offers.
Tip: Ensure your credit report is accurate and provide updated documents for negotiation.
FAQs
Q1: Can I negotiate interest rates during loan renewal?
A: Yes, especially if you have a good repayment history and strong credit score.
Q2: Is it better to renew with the same bank or switch lenders?
A: Compare both options. Switching lenders may offer lower rates but consider processing fees and convenience.
Q3: Does extending tenure always help reduce EMIs?
A: It reduces EMIs but increases the total interest paid. Use an EMI calculator to decide.
Q4: How can I avoid hidden charges during renewal?
A: Read the fine print carefully, ask the bank for a detailed fee breakdown, and check for prepayment or processing fees.
Published on : 3rd October
Published by : SMITA
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed
https://play.google.com/store/apps/details?id=com.vizzve_micro_seva&pcampaignid=web_share