In today’s financial taking a personal loan to meet various kinds of requirements has become a common affair which thousands of young earning professionals are resorting to on a regular basis. However while opting for these seemingly easy and simple loans one needs to appreciate the additional fees and charges that are applicable over and above a high rate of interest on the borrowed capital in the case of a personal loan. The exact nature and number of additional charges levied on personal loan varies from bank to bank but listed below are some of the common fees that are applicable on personal loans across India.
The processing Fees: This is an amount that is charged upfront while making the loan application towards the administrative cost borne by the bank in processing the loan application. Normally the rates are 1 to 2 % of the loan amount while in some cases it is fixed amount. Usually the public sector banks charge a lower amount as compared to the private banks.
The Prepayment Penalty: This is the additional penalty that one needs to pay for repaying the personal loan before the scheduled time frame. The amount is usually a small percentage of the outstanding amount as on that day. This is to make up for the loss in interest based revenue for the bank due to closure of a running loan account.
The Let Payment Fees: This is the most hurtful of all the additional charges applicable in a personal loan as it amounts to around 5 % of the defaulted amount for that period of time.
The Cheque Bounce Charges: When a cheque of the borrower towards repayment of a personal loan bounces the banks makes an additional charge of a fixed amount ranging between Rs. 250 to Rs. 500 as a penalty for the dishonoring of the cheque.
The Document Verification Charges: Some of the banks charge an upfront amount for personal loans which they justify as the money spent towards verification of the credentials of the documents submitted by the applicant during the loan application.
The Miscellaneous Charges: In addition to these charges that are listed above the banks may charges a host of other miscellaneous charges such as fees for a second statement or copy of the agreement and loan approval letter.
The personal loans are inherently for a shorter duration and with a higher rate of interest. But the short duration translates into lesser actual earnings for the lender in terms of net interest earned. Thus it is the endeavor of all lending institutions to make as much money as possible through the additional charges justifying them as the cost of getting an unsecured loan. So while applying for a personal loan the customer must calculate the total cost after the high interest rate in order to be able to measure the efficacy of the loan in meeting the financial requirements.