When it comes to meeting certain personal expenses, there is no better option than borrowing a personal loan. Personal loans offer a fixed amount to borrowers, for a fixed time period, at a fixed rate of interest.
While personal loans seem to be an easy option for borrowing money in times of need, it is important to consider the fact that taking personal loans involves more expenses than you’d think. Additionally, there are chances that the lenders may not highlight such hidden expenses to you at the time of application for the loan. Hence, it is vital for you to keep a close eye on these additional charges and fees on personal loans and be prepared for them beforehand.
Here are all the additional personal loan charges that you must look for, as you apply for a personal loan.
Personal Loan Charges
All the personal loan charges and additional fees have been listed in detail below. It is advised that you keep a close eye on each one of these expenses before applying for the personal loan.
- Personal Loan Processing Fee
The personal loan processing fee is actually borne by the bank for administrative expenses. The amount of this processing fee varies somewhere between 0.5% and 2.50%, varying from bank to bank. Even though this personal loan processing fee is borne by the bank at the moment, the bank charges the expenses from the borrower later on.
- Verification Charges
Since most personal loans are unsecured, banks need to verify the borrower’s repayment capacity before actually giving out the loan. To do so, banks usually hire third party agencies that are responsible for verifying the borrower’s credit score and credit repayment pattern. For doing this job, these agencies charge a fee from the bank, which is eventually borne by the borrower.
- Goods and Services Tax
GST or Goods and Services Tax is a small fee that is to be paid by the borrower for any additional services required in the process of the loan’s sanction or during the period of repayment of the loan.
- Late Payment Penalty
When you borrow a personal loan, you are entitled to pay fixed monthly instalments in the form of EMIs as a means to repay the loan amount in parts. These equated monthly instalments must be paid on the pre-decided date. If, somehow, the borrower fails to do so, then he/she will have to pay a penalty for the late payment of EMI. Hence, it is strictly advised to calculate the EMI amount before borrowing the loan and to calculate your finances accordingly.
Pro Tip: Borrowers have an option to decide their EMI amount. If your budget does not allow you to pay huge instalments every month, then you can also choose to have a lower EMI and pay these instalments for the longer term.
- EMI Bounce Charges
If in case, the borrower misses an EMI, then he/she will be charged an EMI bounce fee as a penalty for missing an installment. This amount is levied by the lender on the borrower. The EMI bounce charges are somewhere around Rs. 1000 per installment.
- Personal loan preclosure charges
There are certain cases in which borrowers might want to pay their EMIs or pending loan amount prior to their actual due date. However, your bank may incur a loss if you decide to pay off the loan amount before the actual tenure ends. In order to suffice the loss, the bank asks for loan preclosure charges from the borrower. Generally, the loan preclosure charges range between 2% and 4%, varying from bank to bank.
- Duplicate statement fees
If you ask the bank to generate a duplicate statement of your payment schedule or your loan’s outstanding balance. This fee for a duplicate statement costs somewhere between Rs. 200 and Rs. 500 to the borrower, depending upon the banks.
- Online convenience fees
With the ease of technology, customers have access to all their statements and loan-related information online. To provide these online services, banks charge an online convenience fee of around Rs. 2500 from their borrowers.
- Part pre-payment charges
Certain favorable financial situations like receiving bonuses, etc. may put you into thoughts of pre-paying your loan installments or a part of your personal loan. However, before you decide to pre-pay a part of your personal loan, you must be aware of the part pre-payment charges applicable on personal loans. You will have to pay a charge of 2% plus taxes on the part pre-payment amount. Additionally, it must be noted that you are allowed to pre-pay a part of your payment only if the amount is greater than at least the amount of one EMI.