Personal Loan Charges:
Personal loans are a convenient way to get quick funds for emergencies, education, travel, or home renovation. However, many borrowers overlook the additional costs linked to these loans. Understanding all the charges beforehand can help you plan your repayment wisely and prevent financial stress later.
Banks and financial institutions charge a processing fee to handle your loan application and administrative work. This usually ranges between 0.5% and 3.93% of the loan amount. Some banks, like HDFC or ICICI, have fixed or percentage-based charges that may include GST. The fee may be deducted from your loan amount before disbursal and is non-refundable, even if your loan is not approved.
If you decide to close your loan early or pay a large portion before the end of your tenure, some lenders charge a prepayment or foreclosure fee. These charges generally range between 2% and 5% of the remaining principal amount. Some banks may allow early repayment without penalties, but always check the terms before signing. Partial prepayments also have restrictions based on the bank’s policy.
If you delay your EMI payment, lenders impose a late fee or penalty. This usually ranges between 1% and 2% of the overdue EMI amount. Continuous delays not only increase your costs but also harm your credit score, making it difficult to get loans in the future.
Apart from the main fees, borrowers should be aware of additional costs such as stamp duty, bounce charges, and document issuance fees. Bounce charges (for failed EMIs due to insufficient funds) can be between ₹500 and ₹1,200.
Understanding these charges helps you avoid hidden costs, plan your repayments better, and maintain a healthy credit score (above 750). Always read the loan’s Key Fact Statement and confirm all details with your bank before applying.
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