Who does not need a loan in this world? Everyone does!
I was in need of one in month of April, 2007. Interest rates were at its peak during this time. All leading banks were offering personal loans at 15% interest per annum on reducing balance basis. No bank was ready to offer at less than that.
Then, came along a citifinancial executive who gave me an irresistible offer at 11% interest for loan amount of Rs. 150000 for 3 years tenure. I just went for it and in the process signed some blank papers. This was the worst mistake I did in my life!
The loan was sanctioned for Rs.150000 and demand drafts were directly deposited into my bank account. The loan was sanctioned on 19th April, 2007. I received no communication like welcome note/terms and conditions/repayment schedule from Citifinancial later on.
Only on 2nd June, they called me to inform that they are debiting my account with the first EMI of Rs. 5667 on 05th June and to keep adequate balance!
EMI of Rs.5667 for Rs.150000 for 3 years at 11% reducing balance interest was higher. Actually it should be Rs. 4910/-. I felt something is wrong somewhere.
I called the executive who worked on my case and he told me he could not get it at 11% but got it sanctioned at 12%. At 12%, EMI should have been Rs. 4982/- but now it is Rs.5667.
After probing more, I got a shock that it is 12% flat rate of interest and not on reducing balance.
12% flat rate of interest is equal to 21.2% interest rate on reducing balance!
He had never mentioned that they charge 12% flat interest and I had assumed they charge interest on reducing balance like all banks.
It becomes duty of the executive to explain the details. But, he had neatly concealed to trap people like me.
I was cheated for trusting Citifinancial. Let me explain the difference amount between flat interest and reducing balance interest at the rate of 12% for Rs. 150000 for 3 years
Total interest amount for:
Reducing balance interest is Rs. 29357
Flat rate interest is Rs. 54,000
The difference is whopping Rs. 24,643, a 84% extra!!!!
I immediately went to the branch to verify and bank was unwilling to convert the interest type or reduce it. Hence I closed the loan with them.
So my friend, be very careful when you apply for a loan. I have mentioned some do's and dont's so that you don't fall in a trap like me.
Do's
1. Enquire the type of interest, whether it is flat or on reducing balance of loan
2. Enquire about the processing fees. Some banks charge and some don't. Fees vary between 0.5% to 2%.
2. Use online tools to verify whether the EMI matches with the interest rate and tenure of the loan
3. Before signing the loan agreement papers check whether the loan amount, interest rate and EMI is mentioned
4. When the loan is sanctioned, many banks provide a DD. That's your last chance to reject the loan. Check again whether loan is sanctioned on agreed terms.
Don'ts
1. Don't trust the bank blindly. If something goes wrong, ultimately you will be the loser.
2. Don't sign any blank papers
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3 comments:
"I completely Agree with you"..citifinancial Guy's are NO1 fraud's ....Never ever trust them...i would suggest all the people who have got loan from them to close it asap...otherwise these people will swallow all your property...i realised this Late but i am going to close that Asap..."
We should request to RBI to stop this bank from doing business. Loan was availaible from moneylenders @ 25% per annum. Government stopped that and now the RBI has allowed new type of moneylenders like citifinancial. this should stop or there will be people who will come on the road for this demand.
Hello. I find your blog very interesting. I have had so many troubles with financial companies. The most frustrating experience was with the Citi Financial company. When I went to www.pisseconsumer.com to post a complaint about the company and it turned out that I am not along. So many negative feedbacks have already been posted. Is not it a scam?
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