Personal loans are quick loans you can avail in times of financial emergencies and any time you need funds. For a personal loan there are no restrictions on how you can use the money, unlike a home loan or a car loan, which must be used for the purpose for which you borrow it. These unsecured loans are convenient since you can pay them back over time in affordable installments and you can receive speedy disbursement with little to no documentation.
Your bank imposes specific fees and charges on this loan because it is an unsecured loan, meaning you are not obliged to put up any assets as security for the loan. However, fees and charges differ depending on the bank and interest rate may differ depending on the credit score.
These are some fees associated with a personal loan.
Loan processing charges
Each bank determines the minimum and maximum percentage of the loan processing fees that the borrower must pay.
The bank must cover certain overhead costs while processing and approving your loan. This is often a little fee that ranges from 0.5% to 2.50 percent of the total loan amount and is normally inconsequential.
Kotak Mahindra Bank charges up to 3% of the final loan amount plus applicable taxes. Will be deducted from the loan amount at the time of disbursal.
Verification charge
A bank needs to be confident in your ability to repay the loan before they will sanction it. Usually, the banks employ a third-party organisation to verify your credentials to be confident in your ability to repay the loan before they will sanction it.
They investigate your credit reports and loan payback histories. The incurred cost must be paid by the borrower because it is an extra expense that the bank will incur. This fee is thought of as a verification fee.
Fine on EMI defaults
Personal loan borrowers should make sure to have enough money set aside to make timely EMI payments. There will be a fine, if you fail to do so. Therefore, rather than attempting to pay off the loan quickly, choose an EMI amount that you can afford. Kotak Mahindra Bank charges Rs 500 plus taxes per instance of EMI dishonour/Bounce charges. IDFC First Bank Charges up to Rs 400 per EMI bounce.
GST Tax
The customer must also pay a minor fee in the form of GST tax if they need any additional services during the loan approval or repayment period. According to the IDFC First Bank, GST, as applicable, will be levied on all service charges. In case customer is related person to IDFC FIRST Bank, GST, as may be applicable, needs to be paid by customer.
Prepayment/Foreclosure penalty
The interest you pay on the loan is how the banks make money. If you pay off your debt before the agreed-upon duration, your bank could suffer a loss because you have already paid off the loan. Your bank might impose a prepayment penalty as compensation for this loss. A bank will often assess a 2-4% prepayment/foreclosure fee. IDFC First Bank charges up to 5% of principal loan outstanding after payment of 6 or more EMIs on foreclosure.
Source By: economictimes
