Question 1

Why are personal loan interest rates so high?

Accepted Answer

Personal loans are typically unsecured loans, meaning they do not require collateral like a house or a car. Because the lender takes on higher risk, they mitigate this by charging a higher annual percentage rate (APR).

Question 2

Can I prepay or foreclose a personal loan?

Accepted Answer

Yes, most banks allow prepayment or foreclosure after a certain lock-in period (often 6 to 12 months). However, they usually charge a foreclosure penalty ranging from 2% to 5% of the outstanding principal.

Question 3

Is it better to take a shorter or longer tenure for a personal loan?

Accepted Answer

If you can afford a higher monthly EMI, a shorter tenure is financially better because it minimizes your total interest burden. Opt for a longer tenure only if you need a smaller EMI to maintain cash flow.

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