Personal Loan Statement: Personal loan is the easiest and fastest credit option available today. Be it sudden hospital expenses, home repairs, children’s education expenses or any important purchase, people often resort to personal loans. Banks and NBFC companies also provide loans with less documentation. But getting the loan easily is not enough, it is equally important to repay it properly and understand the loan process carefully. The most important document for this is personal loan statement.
The loan statement is sent to you every month by the bank or financial institution. This is not just a piece of paper but your entire loan record that how much you have repaid, how much is left, how much EMI was deducted in which month, what was the change in the interest rate and what charges were imposed. Sometimes even a small mistake can cause huge loss. Therefore, it is wrong to ignore the personal loan statement. Let us understand which 5 things must be checked in this statement.
1. Outstanding Principal Balance
The most important part of the loan statement is your outstanding loan balance, which is called the outstanding principal balance. It tells you how much amount you have paid so far and how much is left. The opening and closing balance every month should match your EMI schedule. If there is a difference in the figures, it could be a result of processing error, wrong EMI entry or some technical glitch. As soon as you notice a mismatch, talk to the bank immediately. Postponing it can cause huge losses in the future. Many customers keep paying EMI without checking the statement, but entering wrong balance may increase the tenure of the loan or the EMI may become higher.
2. EMI Breakdown
EMI is in two parts – principal and interest. In the initial months, a large part of the EMI goes towards interest and later on the principal increases. This is called amortization schedule. Your EMI breakup should match the pattern mentioned in the loan agreement. If there is a difference in EMI, it is important to ask the bank instead of “assuming it”. Many times the interest rate changes, but the bank’s notification or SMS is missed. In such a situation, the increase in EMI is not even known. Therefore it is always important to check EMI breakup.
3. Applicable interest rate
Personal loan interest rates change frequently, especially if your loan is on a floating rate. In such a situation, it is important that you keep an eye on the interest rate shown in your statement. Cross-check the annualized interest rate shown in the statement. If you have received any email, SMS or notification regarding interest rate change from the bank, compare it with that. Sometimes, due to wrong interest rate being applied in the system, the EMI may increase or the total payment amount may become higher. In a loan with high interest rate, even a small error can increase your total payment significantly.
4. Charges and Fees
It is very important to read the charges appearing in the statement carefully. These include-
- Late Payment Fee: Additional fee charged on late deposit of EMI.
- Penal Interest: Additional interest on missed EMI.
- GST, Processing Charge, Documentation Fee: Some banks also add a small charge on every service.
Many times banks impose small charges without giving clear information, which add up to huge charges. If any charge seems wrong to you, immediately ask the bank.
5. Repayment History and Overdue Status
This is the part of the statement that impacts your credit score the most. In this it is told whether your EMI was paid on time, is pending or overdue. If you have installed auto-debit (NACH/ECS), it is important to check whether it is working properly or not. Many times, due to a system error on the part of the bank, EMI is shown as pending, even though the payment has already been made. Such a mistake can spoil your CIBIL score. Therefore, check this section carefully every month.
