Personal Loan Fees and Charges
Personal loans are one of the best financial tools which can be used by an individual to meet his/her expenses. However, a personal loan is not only about the interest which is charged on the loan amount. There are a few other fees and charges which should be taken into consideration.
Thus, it is important to ascertain the affordability or the overall cost of a loan only after considering the fees and charges that are associated with it.
Fees and Charges of Top Banks in India
The fees and charges in relation to the personal loans for the top banks in India are listed below:
Name of bank | Processing Charges | Pre-payment charges | Late payment charges |
HDFC Bank | Up to 2.5% [Subject to a minimum of Rs.1,999 and a maximum of Rs.25,000] |
| On the overdue principal or EMI - 2% per month |
Kotak Mahindra Bank | Up to 2.5% p.a. + GST | Lock-in period of 12 months, post 12 months - 5% charges for foreclosure + GST | 3% per month (compounded monthly) |
The State Bank of India (SBI) | Nil to 1% of the loan amount - on the basis of the loan applied for | 3% for Xpress Power Loans, Xpress Credit group of loans, and Xpress Pension Loans | For each EMI dishonoured - Rs.500 + applicable tax |
Yes Bank | Up to 2.5% of the loan amount [subject to a minimum of Rs.999 + tax] |
| 24% p.a. on the outstanding amount from the date of default |
Union Bank of India | 0.5% of the loan amount [subject to a minimum of Rs.500 + GST] | - | - |
Bank of Baroda | 2% of the loan amount + tax [subject to a minimum of Rs.1,000 and a maximum of Rs.10,000] | - | 2% on overdue amount |
IndusInd Bank | Up to 2.5% of the loan amount + tax |
| Rs.450 + tax |
Bank of India | 2% of the loan amount + tax [subject to a minimum of Rs.1000 and a maximum of Rs.10,000] |
| - |
Dena Bank | 1% of the loan amount | Nil | - |
Common Charges and Fees Related to Personal Loan
The charges and fees that are related to personal loan can be listed down as follows:
- Processing charges: At the time of processing a loan, a bank will be bearing some cost related to administration. This amount is quite small and often varies between 0.5% and 2.50%. The processing charges for personal loan will vary from bank to bank. The individual applying for a personal loan can choose from: (I) paying the processing fee straight away, or (II) having the processing fee deducted from the actual loan amount at the time of its disbursement.
- Verification charges: A bank will have to be assured about the loan repayment capacity of an individual before they actually disburse the loan. For the purpose of verification, the bank usually hires an agency (third party) for verifying the credentials. These agents check the credit scores and credit repayment patterns of the individual who has applied for the loan. This extra cost incurred on part of the bank for the purpose of verification is known as the verification charge. This charge has to be borne by the applicant of the loan as it is an additional cost for the bank.
- Goods and Services Tax: For any additional service which is required by the loan applicant during the sanction of a loan or during the period of repayment of the loan, a small fee has to be borne by him/her against the service in the form of Goods and Services Tax or GST.
- Penalty on late payment of EMIs (defaults): When an individual opts for a loan, he/she is required to repay the loan amount in the form of EMIs or equated monthly instalments. It is the responsibility of the borrower to make sure that the EMIs are paid on time. Defaulting the payment of an EMI would attract a penalty. Thus, it is always important to calculate the EMI amount in advance and plan the finances and tenure for the loan accordingly.
- Penalty for prepayment or foreclosure of loan: Foreclosure of a loan stands for the repayment of the loan amount before the stipulated tenure of the loan. Paying off the debt before time might cause the bank to incur a loss. In order to make up for the loss, the bank might charge a penalty for the prepayment. This penalty is usually charged at the rate of 2% to 4% and varies from bank to bank.
- Fees for duplicate statement: A bank might charge a fee for generating a duplicate statement of the schedule of payment and outstanding balance of the loan. This fee generally ranges between Rs.200 and Rs.500. This fee also varies from bank to bank.
FAQs on Personal Loan Fees and Charges
- What is the personal loan charge?
The bank must pay certain administrative expenses in order to process and approve your loan. This is normally a tiny sum, ranging from 0.5% to 2.50% of the overall loan amount, and it varies from bank to bank.
- What does a loan fee entail?
Finance charges are a way for the lender to get paid for giving the borrower credit or the necessary finances. These expenses may consist of one-time costs, like a loan origination fee, or ongoing interest payments that are spread out over time on a daily or monthly basis.
- Which loan is less expensive?
Because they are backed by collateral and have lower interest rates than unsecured loans, secured loans are usually a more affordable option.
- What unstated fees are included with a personal loan?
Some common hidden costs that borrowers should be aware of are processing fees, prepayment penalties, late payment penalties, paperwork fees, insurance fees, and loan cancellation fees.
- Can I obtain a loan for 0%?
If you want to have a respectable credit score, you must pay off all of your debts and invoices on schedule. If your credit score is 750 or above, your chances of getting approved for a personal loan are significantly higher. Even though you won't get a personal loan with 0 interest, you will still pay less.
- Are personal loans costly?
Collateral is typically not required for personal loans, in contrast to auto and home mortgages. While some personal loan kinds may be more expensive than others, they can still be less expensive than credit cards and other lending options.
- Personal loans: are they risky?
To put it plainly, unsecured loans given to consumers with poor credit scores are called high-risk loans. Generally, this category includes unsecured loans like personal loans.
- What is the processing charge for EMIs?
The vendor charges you an interest rate that can range from 8% to 15% in addition to a processing fee that can range from 0.5% to 3% in the event of regular EMIs.
Annie Jangam is a financial writer with a unique background in biotechnology and eight years of genomics research experience, culminating in 6 international publications. She combines her analytical and communication skills to simplify complex financial concepts, delivering precise and creatively engaging content in the fintech industry. She covers various financial products such as banking, insurance, credit cards, tax, commodities, and more. Outside of the financial realm, she dabbles in poetry. Her extracurricular passions include organizing events like One Billion Rising and Human Rights Day. She is committed to the equality of all people, a principle rooted in her Christian faith. Annie strives to embody the values of faith, hope, and love in both her work and her life.
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