5 things to consider before taking a personal loan

Many people are now turning to personal loans. Generally, individuals take such loans to meet essential expenses, while some use them for buying a home or a car.

Banks and financial institutions in the country offer these loans under different conditions. Understanding these terms properly before making a decision helps avoid complications later.

Interest rates, charges, eligibility, and tenure of these loans- all of these factors influence financial decisions.

According to Bangladesh Bank data, personal loans have increased by 26 per cent in recent times, meaning general consumers are increasingly leaning towards personal loans. Before taking one, it’s important to consider a few points:

1. Interest rate and total cost

Annual interest rates for personal loans vary from bank to bank. Credit score, repayment capacity, and past loan history play a major role. You should calculate the actual cost by adding processing fees, early repayment charges, and other expenses, rather than relying only on the declared interest rate.

2. Hidden charges

Banks usually charge a processing fee of 0.5 to 2 per cent of the total loan amount. If someone wants to repay the loan early, an additional fee may apply. Missing instalments may also result in extra charges and legal complications.

3. Customer’s profile and eligibility

Banks or financial institutions examine the borrower’s profile and eligibility before approving a loan. They consider income stability, job continuity, and the debt-to-income ratio.

4. Loan amount and tenure

Many choose a longer tenure to keep instalments low, but this increases the total interest cost. A shorter tenure results in higher instalments but a lower total cost. Larger loans may carry additional interest due to higher risk and this varies across banks.

5. Early repayment and flexibility

It is crucial to know in advance whether there is any charge for early repayment. Those who maintain salary or savings accounts in the same bank often enjoy better negotiation opportunities. If you want to close the loan early, make sure you understand all conditions clearly.

At the end of September of the 2025-26 fiscal year, overall private sector credit growth fell to 6.29 per cent, the lowest in 22 years. Despite the poor situation in business and production sectors, consumer loans are rising rapidly.

In June, consumer loans grew by more than 26 per cent. People are increasingly relying on personal loans to manage household expenses, while credit card spending is also rising. Loans for cars and homes have also grown to some extent.

Under current rules, a customer can take a maximum of Tk 2 million (Tk 20 lakh) as a personal loan, Tk 6 million (Tk 60 lakh) as a car loan, and Tk 20 million (Tk 2 crore) as a housing loan. These categories together make up the consumer loan segment in the banking industry. Interest rates on these loans currently range from 11 to 14 per cent, while credit card interest rates can go up to 25 per cent.

High interest rates, hidden charges, losses arising from missed instalments, and the risk of over-borrowing due to easy approval, all of these make personal loans something to approach with caution. If necessary, consult a financial adviser.

Ultimately, it’s not just about finding the lowest interest rate rather the wise approach is to match the loan structure, total cost, personal income capacity, and future plans before making a decision on taking personal loan.