Personal Loan

Different Kind Of Fees And Charges Applied On Your Personal Loan You Must Know


We all know that when we take a loan, the lender will levy certain charges for sanctioning the credit. Different fees can be applied to your loan, and it’s important to understand them before you sign up for a loan. This blog post will describe the most common types of fees, so you’ll know what to expect. We’ll also provide some tips for avoiding or minimizing these costs. Read on to learn more!

Fees that are generally charged on personal loans

When applying for a personal loan, you may be required to pay certain fees in addition to the interest rate. These fees can include the following:

  • Application or processing fees: This is a fee charged by lenders simply for reviewing your application and helping you complete the paperwork required to apply for a loan. Some lenders may offer to waive this fee if you agree to sign up for automatic payment withdrawals from your bank account.
  • Late payment or default fees: If you miss one of your scheduled payments on a personal loan or default on the entire loan balance, you may need to pay additional fees as part of the penalty. These late payments or default fees vary depending on the lender and may be assessed at a flat rate or a percentage of the entire loan amount.
  • Prepayment penalties: Some loans may charge you a penalty if you choose to pay off the entire balance before your loan term expires, usually within the first few months of taking out the loan. These fees can vary depending on whether they are assessed as a flat fee or an interest rate on your outstanding loan balance.

These fees are charged in addition to any interest that you accrue on your loan balance. Therefore it’s important to do some comparison shopping when looking for a personal loan so that you only have to pay what is necessary and avoid hidden charges from predatory lenders. When reviewing offers from different lenders, make sure to read the fine print carefully to understand exactly what you agree to before signing on the dotted line.

How to avoid or reduce these fees on personal loans

When taking out a personal loan, there are certain fees and costs that you should be aware of upfront. These can include application or origination fees, processing fees, and prepayment penalties.

While most lenders will disclose these fees during the initial application process, it is still important to read the fine print carefully before signing on the dotted line. You’ll also want to shop around for loans with the lowest possible rates and fees to save as much money as possible over the life of your loan.

Here are some tips for avoiding or reducing these fees on personal loans

  1. Compare various lenders’ offers and terms carefully before deciding. Don’t just consider interest rates when looking at loan offers—check out the fees each lender charges.
  2. Avoid prepayment penalties whenever possible. Many lenders will charge you additional fees if you try to pay off your loan early, but these can be avoided by selecting a lender who doesn’t impose them or negotiating with your current lender to waive them.
  3. Pay attention to when and how much the origination fee is applied to your loan balance. Some lenders apply this fee all at once, while others may spread it over several months or years. If you only have a small amount left on your loan, paying interest on extra fees can be an expensive proposition!
  4. Understand what constitutes a return payment and whether your lender charges fees for these. Some lenders charge a fee when they have to process a returned payment, while others do not, so it’s important to know each institution’s policies before you take out a loan.

By being aware of and managing the various fees associated with personal loans, you can save money over the life of your loan and hopefully get more value from your funds overall. And remember—shop for the best possible rates and terms to maximize your savings!​

An example of how a personal loan works with associated fees

Assuming you qualify for a personal loan, here’s an example of how it might work.

You borrow INR 50,000 and agree to repay it over three years at 10% interest. In this case, your monthly payment would be INR 462 and you would pay a total of INR15,000 in interest over the life of the loan.

Let’s say you will pay off your loan a little early, after two years instead of three. In this case, your lender may charge you a prepayment fee equal to 3% of the outstanding balance on your loan (INR 16000). So if you paid off your entire loan balance of INR 50000 today, you would owe a prepayment fee of INR 480, for a total of INR 50480

Personal loans typically have origination fees that range from 1% to 8% of the loan amount. So on our INR 50000 loan example, you could pay anywhere from INR 500 to INR 4000 in origination fees. Some lenders also charge late fees if you miss a payment, ranging from INR 2000 to INR 4000.

Tips on how to get the best deal on your loan

If you’re looking to take out a personal loan, there are a few things you can do to make sure you get the best deal possible. Here are a few tips:

  1. Shop around. Don’t just go with the first lender you find. Compare rates and terms from multiple lenders to ensure you’re getting the best deal.
  2. Know your credit score. The better your credit score, the lower the interest rate you’ll be able to qualify for. So it’s worth checking your credit score before you apply for a loan.
  3. Consider a secured loan. If you have collateral (such as a home or car), you may get a lower interest rate by taking out a secured loan.
  4. Ask about fees. Some lenders charge origination fees or prepayment penalties. Make sure you know what fees you’ll be responsible for before you agree to a loan.
  5. Compare APRs, not just interest rates. When comparing loans, compare the Annual Percentage Rate (APR) rather than the interest rate. The APR includes both the interest rate and any other fees that may be charged, so it’s a better representation of the true cost of the loan.

Following these tips will help ensure that you get the best deal possible on your loan. 


It is essential to know all of the hidden charges and other miscellaneous charges that may apply if you are taking a loan. Piramal Finance has years of financial expertise in personal finance, investment, loans, etc. Connect with us today if you want to know more about this topic.