Sunshine has a shadow too. Most people and banks fail to mention the charges and fees involved in getting a personal loan. This article addresses all such fees and charges, in addition to the interest you’re likely to pay.
A personal loan is one of the most effective financial tools an individual can use to meet expenses. It is imperative to remember that a personal loan is not just about the interest charged on the loan amount. Other fees and charges should also be considered.
After considering the fees and charges associated with a loan, it is vital to assess its affordability. An overview of personal loan fees and charges can be found in this article
Personal Loan Processing Fees – Know More In Detail
Processing charges
A bank will bear some costs related to administration when processing a loan. These costs are usually quite small, ranging between 0.5% and 2.50%. Banks charge different processing fees for personal loans. The processing charges for a personal loan will vary from bank to bank. Individuals applying for a personal loan can choose between (I) paying the processing fee immediately, or (II) having the processing fee deducted from the loan amount at the time of disbursement.
Verification charges
It is necessary for a bank to be confident that an individual will be able to repay the loan before disbursing it. Usually, the bank hires a third party to verify the credentials. These agents look at the credit scores as well as the repayment patterns of the applicant. Verification charges are extra costs incurred by the bank for the purpose of verification. These charges must be borne by the applicant as it is an additional cost for the bank.
Penalty for late payment of EMIs:
In the event that a borrower decides to take out a loan, the loan amount must be repaid in EMIs or equated monthly installments. Borrowers are responsible for paying EMI on time. If you miss an EMI payment, you would be penalized; therefore, determining the EMI amount and organizing your funds and loan term in advance is crucial.
Fine for early loan repayment or foreclosure:
Often referred to as foreclosure, early loan repayment occurs when the full loan amount is repaid before the loan’s specified term has expired. This results in a loss for the bank. To make up for the loss, the bank may charge you a penalty for the prepayment. This penalty typically ranges between 2% and 4% depending on the bank.
Duplicate statement fees
In the event that you lose or misplace your original copy of the schedule of payments and the outstanding balance of the loan, banks generally charge a fee for providing a duplicate copy. The fees for duplicate statement generally ranges between Rs.200 and Rs.500.
Goods and Services Tax
As part of the loan approval process or during the loan payback period, the loan applicant must pay a small fee in the form of Goods and Services Tax. An additional fee is required during the loan application process or during the loan repayment process in the form of Goods and Services Tax, also known as GST
WHAT IS A PERSONAL LOAN PROCESSING FEE?
Among the most significant factors when borrowing money is the interest rate; however, there are a few more things to consider when applying for a personal loan, such as fees and charges.
When a bank processes a loan, it will incur certain administration-related costs. This sum is usually between 0.5% and 2.50%. Personal loans are processed differently by different banks. Depending on the loan’s terms, borrowers may choose to repay their personal loans in two ways: immediately or by deducting the processing fee from the actual loan amount.
How to calculate the personal loan processing fee?
The processing fee is calculated from a tiny portion of the loan amount. The proportion of processing fees could change between the lenders. In India, the processing charge typically amounts to 0.5% of the loan amount besides the GST amount.
Is the processing fees of personal loan refundable?
Because the processing cost is typically non-refundable, the bank will assist in recovering the return by providing a documented statement in case the personal loan is not provided to you.
. Processor costs are naturally deducted from the overall loan amount before disbursements are made by digital lenders. Therefore, you receive less money than you requested.
Conclusion
In general, personal loans are given as a lump sum payment and they are not defined by the bank or lending agency. The borrower may choose how and where to use the loan. There may be hidden charges levied by banks and lending agencies. Therefore it is critical to be aware of the charges that are levied and to question the authorities. An individual should closely monitor the loan statement and the detailed paperwork provided by the lending agency in order to be aware of such charges.
FAQS on personal loan charges you should know
1: Can you get a loan without paying an upfront fee?
The applicant should never have to pay an upfront fee for the loan. A regulated lender will never charge an upfront fee.
2. Types of fees that lenders can charge for a personal loan?
- Origination Fee
- Application Fee
- Prepayment Penalty
- Late Fee
- Payment Processing Fee
3: Can I make partial payments on my personal loan?
The borrower is allowed to make partial payments on certain personal loans, but he or she must pay a fee for it and it must be done only after certain installments have been made.
4: Will non-payment of a loan affect your credit score?
Non-payment of a personal loan will affect the credit score as well as the ability to borrow money in the future.
5. What are the most common charges that banks can charge?
- Monthly maintenance/service fee
- Excessive transaction fee
- Overdraft fee
- Insufficient fund fee
- Early account closing fee
