For most people, getting a personal loan helps meet urgent needs. You can’t do anything, and you wouldn’t have money to cover your necessities if you’re delayed. That’s why many of us have found ourselves in a situation where a personal loan was required.
Personal loans are a great option for funding your business and personal expenses.
When you are trying to get a personal loan of any kind, you usually have a lot of questions. You need to know about the fee details and the personal loan charges involved in getting a personal loan.
It may surprise you to find out that there are no exact rules for fees when getting a loan. In this blog, let’s discuss the minimum charges and processing fees for a personal loan.
Types of Personal Loans
You can borrow money to pay for a personal expense and repay it over time by taking out a personal loan. You can receive a certain amount of money by taking out a personal loan, which is a repayment debt.
There are two types of personal loans. 1) secured (needs collateral), 2) unsecured (requires no collateral). It varies in terms of interest rates, personal loan charges, amounts, and payback terms.
What are the Personal Loan Charges Involved?
Below is a list of some common personal loan charges:
A bank may need to cover some administrative personal loan charges while they review and approve your loan. These fees are often minimal and range from 0.5% to 4% of the total loan amount, depending on the lender.
When requesting a personal loan, you have two options. (I) pay the processing fees in advance.
(II) have it deducted from the loan’s total amount while disbursement occurs.
Each lender determines the minimum and maximum percentage of processing fees.
You must convince your lender of your ability to repay a loan before applying for one. To verify your credentials, the lender hires a third party or agency. These agents look at your credit score and repayment history.
This verification charge is an extra personal loan charge to the lender. As a result of the verification process, you must pay this fee because it adds an extra cost to them.
Goods and services tax (GST)
After the implementation of GST, you may have to pay a minimal fee as GST on loan processing fees.
It is a part of the personal loan charges for any additional services that you request during the loan approval process or throughout the loan period.
Some lenders charge a loan origination fee when you apply for a loan for the first time. The cost of processing and underwriting your loan is covered by origination fees. The percentage of your loan is calculated in this personal loan charge.
These expenses could be deducted from the loan’s funding amount or added to it and paid over time. Origination fees typically range from 1% to 8% of your personal loan amount.
Your lender must invest time and money to give you a loan estimate. Typically, this fee goes toward documentation and other administrative personal loan charges.
Penalties for EMI Defaults
You can repay the loan through EMIs in manageable amounts to avoid personal loan charges. If you don’t pay your EMI, then you have to pay a fee for default in payment.
Make sure you pick an EMI amount that you can afford rather than striving to pay off the debt as quickly as possible.
Pre-payment fees are imposed on a portion of your loan balance as personal loan charges.
The RBI has, however, prohibited lenders from charging pre-payment fees on your loans with fluctuating interest rates.
Penalty on Foreclosure of a Payment
If you foreclose your loan earlier than the agreed-upon term, then the lender suffers a loss.
To compensate for the loss, banks impose personal loan charges as a fee for prepayment. This fee typically ranges from 2% to 5% and varies from one lender to another.
Duplicate Statement Fees
You can generate a duplicate statement of the loan’s payment schedule and outstanding balance if you miss it. For this, you will have to pay a fee as a personal loan charge.
The lender charges a fee between Rs. 200 and Rs. 500.
Charges on Loan Cancellation
If you cancel the loan amount after it has been approved or disbursed, then you have to pay personal loan charges for cancellation.
There are frequent cancellation fees of up to Rs. 1,000 per loan.
Cheque Dishonour Fees
If your cheque for a personal loan bounces, there will be personal loan charges of a set amount. This sum may differ for various lenders.
Lenders charge a maximum of Rs. 500 for each occurrence. If your cheque bounces regularly, then they will charge a higher amount.
Some of the other fees that come under personal loan charges are collection pickup charges, statutory charges, stamp duty charges, legal charges, recovery-related charges, cash collection charges, and so on. All these charges differ from lender to lender.
The Bottom Line
The processing fees vary from 0.5% to 4% of the total loan amount, depending on the lender. Some charges are imposed to take care of the verification fees, default on EMI payments, documentation charges, and prepayment of loan fees.
These are the minimum personal loan charges and the processing fees for personal loans.
To read more articles on personal loans and related topics, check out the Piramal Finance website right away.