According to the TransUnion CIBIL Consumer Report of Q4 2018, there has been 29.3% YoY growth in total unsecured loans. However, when applying for a personal loan here are the charges that you need to keep consider.
- Processing Fees: This is the most common hidden charge which comes up with your personal loan apps. This is either charged upfront or is deducted from the disbursed loan amount. This fee is generally non-refundable and is not minimal. It is somewhere between 2% and 3% of the application amount. These costs certainly increase the repayment amount rather than easing your financials.
- Cancellation Charges: Today, this has become a feature of every kind of service you avail of, be it flights and train bookings or availing a personal loan. The charges vary from institution to institution. They can start somewhere at flat Rs. 1,000 to around Rs. 3,000 with an additional 18% GST is charged. Some institutions may not charge a flat fee but will charge the applicable interest rate between loan disbursal and cancellation days.
- Prepayment penalties: Remember, as a customer, personal loans could be a trap. Anything more than the EMI amount may get you penalties of 2-5% of the outstanding loan amount. Why do prepayment penalties exist? According to the financial institutions, they lose on the interest rate they would get if the repayment is made as per schedule.
- Late payment charges: This is a no-brainer. If you default on your payments or get late with repaying your EMIs, you will be penalized. Perhaps ironically, neither can you repay your loan amount before time, nor can you do that after time. The late payment fees may go up to 2-3% of the EMI amount. This means you might pay more interest on your late fees than your actual loan!
- Effective interest rates: The effective interest rates on personal loans range anywhere between 10.99% and 24% p.a. The upper limit might go higher in the case of non-salaried individuals too. Further, other factors like credit score, relationship with the bank, and financial stability help in determining the applicable interest rate.
- Repayment mode swapping charges: If the mode of repayment is suddenly swapped, say from paying via cheque to auto-debit, you will be charged for this too. Lenders usually charge around Rs. 500 + 18% GST as the swapping charge during the loan tenure.
- Duplicate documentation charges: The financial institution would charge some extra fee for reissuing loan-related documents. These can include statements, NOCs, credit reports, etc. It is generally charged somewhere between Rs. 50 to Rs. 500 (plus 18% GST) for duplication.
- Other charges: There could be various applicable charges depending upon the lender. This might be based on the type of lender, customer’s repayment behavior, types of loan sanctioned, or even the place from where it is sanctioned. They might also charge for stamp duties and other legal charges.
- GST: Earlier, it was the service tax and VAT that were applied on loan-related services. Now, it’s the Goods & Services Tax (GST). This is barely ever mentioned in the loan documentation process but suddenly arises during the payment. The amount in India is relatively high, as the standard is 18% on any loan processing service. This means on every 100 rupees you are told about, an additional rupees 18 rupees is added in the form of GST.
Fibe to your rescue
India’s Largest instant personal loan platform, Fibe ensures that money isn’t diverted on some pretext or the other. Especially on hidden charges, you pay only what you see. Here are some benefits of a personal loan from Fibe:
- Get a loan amount of up to Rs. 5 lakh
- Attractive interest rates
- Processing fees up to 3%
- Prepayment charges are NIL
Remember, before you avail of your personal loan, ask for all information and research from several sources. This will help you in making an informed decision and selecting the best personal loan option.
Download the instant personal app here, or simply log in to our website and be a part of the new vibe of finance.
FAQs on common hidden charges applicable on personal loans
What are the additional charges on a personal loan?
Below mentioned are some common charges apart from the personal loan interest rate:
- Processing fee for personal loan
- Personal loan preclosure charges
- Late payment fees
- Repayment mode swapping fees
- Duplicate documentation charges
What are the hidden costs of a personal loan?
Personal loan hidden charges are fees that you need to pay during processing or repayment that you are not aware of. If not planned for in advance, such charges can be a surprise and strain your finances. They include foreclosure charges on personal loan, late fees, penal interest during late payment, processing charges and more. It is important to read the policies of the lender thoroughly before applying for a loan.
Can I prepay my personal loan without any extra charges?
Yes, you can prepay your personal loan without any additional charges by choosing digital lenders like Fibe — one of India’s leading consumer lending platforms. There are no prepayment charges levied by Fibe which makes it easy for you to become debt-free sooner.
What are the types of charges in a loan?
Type of charges levied on a loan include charges for processing and verification of your loan application, penalties for missing EMIs, charges for duplicate documents, GST as well as fees for prepaying your loan.
Can personal loans be interest-free?
Usually, personal loans are not interest-free as the interest is the cost of borrowing credit. However, lenders may offer interest-free loans, but charge other types of fees such as for application, origination and more. Watch out for personal loan scams that advertise no interest but charge absurdly high fees if you do not repay on time.
What are loan placement fees?
These fees are generally taken by brokers who take care of financial transactions. It can be calculated as a percentage of total value of the transaction. In simple words, loan placement fees are just a brokerage fee to complete the application on behalf of a client.
How much is the processing fee for a personal loan?
Lenders in India usually charge up to 5% of the sanctioned loan amount as a processing fee. At Fibe, the processing fee is up to 3% of the loan amount.
How can I reduce my processing fees?
Since the processing fee can amount to a significant amount, lenders may sometimes waive it. This may be for women borrowers, for creditworthy borrowers, or for existing customers.
What are pre-closure charges for personal loan?
Personal loan pre-closure charges refer to the fees that lenders levy when you pay more than the EMI amount. The charges vary for part-prepayment and full prepayment or foreclosure. At Fibe, you can prepay your personal loan freely as there are zero pre-closure charges.