What are Processing fees & Charges on Personal Loan?

personal loan charges

Sometimes life throws unexpected financial needs, and that’s where personal loans swoop in as your reliable backup plan. Unlike loans designated for specific big purchases like cars or homes, personal loans offer flexibility in utilisation. They’re known for swift disbursement and minimal paperwork, making them an attractive option in times of urgency.

However, before applying for a personal loan, it’s crucial to understand the associated charges. Here are the top five charges you should consider:

personal loan

1. Loan Processing Charges:

Financial institutions typically levy a processing fee, usually ranging between 0.5% to 2.5% of the principal loan amount. This fee covers administrative costs during the loan processing phase.

2. Verification Charges:

To ensure repayment capability, lenders often engage third-party organizations to authenticate a borrower’s credentials. These verification expenses are added to the loan amount.

4. Penalty for Defaulting on Monthly Installments:

Timely EMI payments are vital to avoid penalties and prevent negative impacts on your credit score. Selecting a manageable EMI amount is advisable to ensure consistent repayment.

5. GST Tax:

During loan approval or repayment, a nominal GST tax is imposed on service charges associated with the loan process.

6. Foreclosure or Prepayment Charges:

Repaying a loan before the agreed duration may incur a prepayment penalty, typically ranging from 2% to 4% of the outstanding loan amount, to offset potential losses for the lender.

Please note that these charges vary among lenders. Contact your lender directly to understand their specific terms and conditions regarding personal loan charges.

Also, Read: What are Processing fees & Charges on Personal Loan?

Now have you ever wondered about the costs linked to getting a personal loan from India’s top banks? It’s important to know what you might face—fees for processing. Here’s a peek into the charges set by some of these banks:

Breakdown of Processing Fees for Personal loans from leading banks in India

Name of the bank: Processing charges: 
HDFC BankUp to 2.5% (Min Rs.1,999, Max Rs.25,000)
SBI (State Bank of India)Nil to 1% of the loan amount (Varies based on the loan applied for)
Yes BankUp to 2.5% of the loan amount (Min Rs.999 + tax)
Kotak Mahindra BankUp to 2.5% p.a. + GST

Calculate Your Personal Loan EMI

Personal loans serve diverse purposes, whether it’s for your dream wedding, travel, purchasing consumer goods, or consolidating credit card debt. The beauty of these loans lies in their versatility, allowing you to use the funds as needed, albeit with specific fees due to their unsecured nature.

At Credmudra, we prioritize a seamless borrowing experience. Upon application, we match you with a suitable financial institution within a minimum turnaround time.

Awareness of these personal loan charges is crucial, as they directly impact the total loan amount. Make informed decisions to achieve your financial goals responsibly.

Also, Read: How to Get a 50000 Loan on Aadhaar Card?

FAQs: 

1. Can I be arrested if I do not repay my personal loan?

Loan default is a civil dispute, and as such, any lender cannot press criminal charges against an individual for failing to repay a loan. Therefore, the police do not have the authority to make arrests in such cases. It is important for genuinely struggling individuals who are unable to meet their EMI obligations to not lose hope or become hopeless.

2. What are the legal actions against loan defaulters?

Under Section 138 of the Negotiable Instruments Act of 1881, if a loan remains unpaid for a period exceeding 180 days, the lender has the right to initiate legal action against the borrower.

3. What do I need for a personal loan? What are the five typical personal loan prerequisites?

The Standard Five Personal Loan Prerequisites:

  • Credit Score and History
  • Income Verification
  • Debt-to-Income Ratio Assessment
  • Collateral Evaluation
  • Origination Fee Understanding

4. What is a good personal loan interest rate?

Finding the right personal loan interest rate often aligns with your credit score:
For a credit score of 750 and above, you can secure rates below 8% (ideal for excellent credit).
If your score ranges from 670 to 739, expect rates to hover around 14% (common for good credit).
For those with scores between 580 to 669, rates might average around 18% (typical for fair credit).

5. What exactly is a personal loan?

It’s a type of credit offered by financial institutions, relying on factors such as your work history, income, ability to repay, profession, and credit background.

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