HT Syndication
New Delhi [India], January 13: With the help of a personal loan, you can fulfil your goals and objectives. It can help you during times of emergencies. It can also help you to celebrate various functions and festivals. Your desire to buy expensive gadgets can also be fulfilled by a personal loan.
However, a personal loan comes with various charges and fees. Some lenders may hide this from you. And later on, you may be surprised when it is levied on you. In this blog, we will study about various hidden charges in a personal loan.
Hidden Charges in Personal Loan You Must Know
Some of the major hidden charges in a personal loan are as under: –
1. Processing Fees
The processing of a loan involves certain administrative charges. These charges are levied on loans in the form of loan processing fees. The processing fees are charged upfront at the time of loan application, or it is deducted at the time of disbursement.
This is generally a small percentage of the loan amount. It typically ranges from 1% to 3% of the loan amount. You can negotiate for a discount or waiver of loan processing fees with the lender.
2. Late Payment Charges
Whenever you miss out on paying the loan EMI on time then lenders charge late payment fees. This can be a fixed amount or a certain percentage of the overdue amount. Repeated delays in loan payments can affect your credit score.
Generally, this delay in loan EMI payment happens due to oversight. Hence, it’s advisable to get EMIs deducted from the bank automatically through the auto debit facility.
3. Foreclosure Charges
Borrowers, at times, receive the lump sum amount in the form of an incentive or bonus from the employer. They use it to repay the loan before the stipulated time period. This is also known as loan foreclosure.
As the loan is closed before time, hence lender has to face a loss of interest. Which they would have earned if the loan had not been foreclosed. To compensate for this, the lender levies foreclosure charges. This can be a percentage of the outstanding loan amount.
4. EMI Dishonour/Cheque Bounce Charges
Nowadays, EMI is generally debited from the borrower’s bank account through an auto debit facility. Other than that, you can also make the EMI payment through a cheque. If the payment is returned due to insufficient balance in the bank account or cheque dishonour, then the lender will impose payment return charges for this.
5. Partial Repayment Charges
You have an option to pay more than the regular loan EMI. Due to this, your loan will be repaid before the scheduled time. As a result, the lender will earn less interest. To compensate for this, they impose partial repayment charges on the borrower.
The partial repayment charges are a percentage of the partial repayment you made of the overall loan amount. Banks and NBFCs allow partial repayment after a certain period. This can be 6 months, 1 year or more depending on the bank.
6. EMI Pick Up/Collection Charges
The borrower may not have sufficient balance in his account from which the EMI is debited. Or he may not have time to deposit the instalment cheque in the bank. In such cases, he may ask the bank to pick up the EMI cheque or cash from his home or office. Lenders do offer this service, but they charge for this. This charge is on an instance basis.
7. Verification Charges
Banks and NBFCS assess borrowers’ creditworthiness by checking their credit score and credit report. They also have to verify the borrower’s credentials. This requires expenses, which are levied on the borrower in the form of verification charges.
8. GST Charges
As per the Government rule, GST of 18% is applied on various personal loan-related charges. The bank/NBFC collects the GST charges on behalf of the Government and passes it to the Government.
How to Find Out Hidden Charges in a Personal Loan
As per the RBI, lenders can’t hide the fees and charges of a personal loan from the borrower. They need to reveal all charges and fees in the key fact statement. Here are some ways to find these hidden charges in a personal loan: –
1. Ask Lender
You can directly ask the lender about this. This is the best way to clear all doubts related to charges and avoid any kind of confusion.
2. Go through the Loan Document
After you apply for the personal loan, the lender will send you a document. This has all the details about the loan, including all charges and fees. Read the entire document carefully to understand all kinds of charges and fees.
3. Check Website
You can also visit the official website of the Bank/NBFC. It has complete info about the fee structure and charges. If the fee structure is not mentioned, then you need to be cautious.
Conclusion
People frequently opt for personal loans these days to fulfil their needs and goals. Personal loans come with interest and various charges. One should go through the loan document carefully to understand this.
These charges include processing fees, collection charges, and foreclosure charges. GST etc. If you have the clarity about these charges in advance, then you don’t have to bear unnecessary expenses.
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