You should have a regular income source, whether you are a salaried or self-employed professional to avail a personal loan. Apart from this, the hassles involved in applying for a personal loan, there are also significant charges that are incurred which are not visible on the surface. The processing fees and prepayment fees for a personal loan are much higher than loans against properties. While applying for a personal loan, it is important to calculate beforehand the personal loan charges so that you can analyse your financial obligation completely and evaluate whether it is worthwhile to apply for the loan or not.
The charges that are incurred before a loan is disbursed, during the course of the loan or when the loan is terminated are as listed below.
Description of Charges
- Processing fee
- Prepayment fee
- Charges for late payment
- Cheque bounce charges
- Duplicate statements charges
- Documentation charges
- Service tax
1. Processing fee
Processing fee is the amount charged by banks for processing an application for a loan. Processing fees vary from bank to bank ask you to pay the processing fee beforehand even before the loan is sanctioned. This is typically charged when you submit your loan application along with the supporting documents.
The processing fee is generally a percentage of the loan amount and is usually between 1-2 per cent for personal loans.
Although some banks suggest that the processing fee will be refunded if the loan is not processed, since the processing fee is usually non-refundable, it is prudent to get a written statement from the bank that the processing fee will be refunded if the personal loan wasn’t deemed to be made available.
2. Pre-payment fee
The pre-payment fee is the penalty paid by the borrower for terminating the loan before the end of the stipulated tenure. Pre-payment fees are levied as a percentage of the outstanding principal of the loan amount. The prepayment fee varies from bank to bank. It varies between 2-5%of the outstanding loan amount, if the repayment amount exceeds 25 per cent of the outstanding loan amount. It is also important to note that some of the leading NBFCs like Finserv MARKETS offer personal loan products with zero prepayment/foreclosure charges.
3. Charges for late payment
If the borrower commits delays payment of his/her monthly personal loan EMIs, the bank issues a late payment charge which is also known as delayed payment charge or overdue payment charge. Late payment charge rates are fixed at the time of signing the loan contract.
This is only chargeable if you make the payment after the due date. Late payment fees ranges from 2-3%of the EMI.
4. Cheque Bounce Charges
When a cheque has been presented for clearance, but the amount written on the cheque exceeds the available balance in the account, then the check is said to have been bounced. If a single cheque bounces, the bank can charge anywhere between Rs 250 to Rs 500 as a check bounce charge.
5. Duplicate Statements Charges
When the loan is sanctioned, the lender issues you a statement containing the repayment schedule. If you happen to lose it somehow, you can request the bank to issue a duplicate statement. The statement shows your balance loan amount and the remaining EMIs. Banks ask for anywhere between Rs 100 to Rs 500 for issuing duplicate statements.
6. Documentation charges
Banks levy documentation charges towards the verification of the various documents you provide towards the loan application, which is carried by third-party vendors employed by the bank. Documentation charges are usually between Rs. 500 and Rs. 1000.
7. Service tax
Service tax is a tax, charged at the rate of 12.36%, which is levied on service providers who have annual revenue of more than 8 lakh. Unfortunately, personal loans fall within the purview of service tax too.
Knowing about all these personal loan charges beforehand will help you hedge your bets stringently and maintain your financial stability while applying for a personal loan.
With Finserv MARKETS, applying for a Bajaj Finserv Personal Loan is easy, convenient and completely hassle-free. What’s more? You also get a host of other benefits and features that you can avail and get the maximum out of your loan.
Just in case if you have a low CIBIL score you can also learn on how you can apply for a personal loan with low CIBIL score.
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