Everything You Should Know About Personal Loan Charges

Personal loans are the most utilised credit options to meet sudden or planned financial requirements. Loan seekers should know the fees associated with a personal loan as it is not restricted to merely interest costs. Other fees, such as processing fees, are also added to the amount charged from the borrowers.

Here are the additional costs associated with personal loans.

• Processing Fee: The lending institutions charge a fee to process your loan application. This amount is relatively small and can be up to 6% of the loan amount or depending on the policy of the lending institution. It is usually deducted from the total loan amount approved at the time of disbursement or, in rare cases, a post-dated cheque may be collected by the lender after the loan sanction. No reputed lender will ask for this amount upfront before disbursing the loan.

• Verification Charges: A few lenders may even charge a verification fee to the borrower, particularly if the borrower is self-employed.

• EMI Bounce Charge: If you miss an EMI for certain reasons, you will have to pay a bounce fee as a penalty. The fee may be levied if the borrower's bank account does not have sufficient funds at the time of EMI payment processing. Therefore, borrowers must always plan ahead. Borrowers can use the personal loan calculator to know the EMI even before applying for a loan. It can help the applicants choose a suitable tenure so that the EMI fits within their monthly budget. A borrower must always ensure that their registered bank account has sufficient funds on the due date of EMI payment to avoid being hit by these charges.

• Goods and Services Tax (GST): Like any other sector in the economy, 18% GST is applied to loans as well. GST is charged on additional services requested by an applicant during the loan tenure. Lenders may charge GST on prepayment fees, processing fees, duplicate statement fees, etc. GST is not applied to interest charges.

• Prepayment or Foreclosure Fee: When a borrower forecloses a personal loan before the loan tenure, the lender charges a foreclosure fee. This may lie between 0% - 7% of the outstanding principal amount, depending on the lender's policy and the number of EMIs already paid.

• Late Payment Penalty: When an individual takes a personal loan, they are obligated to return the debt through EMIs (equivalent monthly instalments). The EMIs are easy and affordable and should be paid on time. If the loan EMIs get delayed, the lender will levy a penalty on the borrower. You should refer to the loan schedule or sign-up for the ECS/auto-debit facility to avoid this issue.

• Duplicate Statement Fee: A lender may charge a fee for producing a duplicate report reflecting the loan's payment schedule and outstanding balance. This cost is minimal and varies from lender to lender.

• Loan Cancellation Penalty: If you change your mind about your loan and want to cancel the application after approval, the lender may charge a loan cancellation fee. It can be a fixed charge plus 18% GST. A few lenders may charge the corresponding interest amount for the period when the loan was issued to when it was cancelled. Please note that after a certain number of days have passed, most lenders do not even accept loan cancellation requests. To avoid these complications, apply for a loan only if you are 100% sure that you will take at least 12 months to repay the loan.

• Charges for Switching Repayment Modes: Borrowers get the flexibility to switch their loan repayment mode but against an additional fee. When a borrower changes the repayment mode in the middle of the loan tenure, lenders may charge a switching fee + GST.

• Charges for Duplicate Paperwork: A few lenders may charge a fee to reprint loan-related paperwork. You can get reprinted indices, statements, No Objection Certificates (NOCs), and amortisation at a minor fee for the service.

• Other Charges: Other charges may include legal charges and stamp duty applied to a personal loan. These charges may differ from one lender to another.

How to Apply for an Affordable Personal Loan?

One can apply for a Fullerton India personal loan available at an affordable interest rate with transparent fees and charges. It is an unsecured loan available up to INR 25 lakhs* for eligible applicants without any collateral with tenure up to 60 months. If you fit the required eligibility criteria and have a good credit score and history, your loan may be approved without any hassle.

If you are an existing customer of the lender, depending on your eligibility and repayment history, you can look for pre-approved loan offers. These are instant personal loans for valued customers.

# This is a guest article authored by Fullerton India. For any enquiries or details, you can visit the author's website.