The personal loan has emerged as the most viable solution for a variety of monetary needs. The unsecured nature of these loans makes it quite easily accessible, and interest rates are quite affordable. The need to pledge one’s asset is completely eliminated while opting for a personal loan, also commonly known as cash loans. These are, therefore, extended to salaried individuals and self-employed persons to meet their requirement for money. Expenses such as higher education fees, medical expenses, wedding costs, consolidation of various debts, business expenses and even expenses incurred during vacation can be easily managed with an online loan.
It is quite easy to apply for and receive a personal loan as all banks and financial institutions offers these. The application process is simple and completely digital especially if a Fintech like Qbera is preferred. One does not have to provide stack loads of paperwork either, as there are minimal documentation requirements. Having said that, it is still important to look at all aspects of the loan document with special emphasis on the charges and penalties levied.
The charges and penalties clauses are hard for a non-professional to understand and so many choose to ignore them, but these have a huge impact on the loan amount and the final amount that you pay to the lending institution. These allied charges also make the total cost of the loan to shoot up exponentially.
Here is a list of allied charges that are associated with the personal loan:
- Processing fee: The administrative cost associated while processing the loan application is called as processing fee. These may be charged starting at 1% – 3% of the total loan amount. This is an upfront payment that is charged on the borrower before disbursing the loan amount.
- Late payment charges: Any delay in the payment is charged on either a daily or monthly basis by the lender.
- EMI bounce/ Cheque bounce charge: Insufficient amount in your account while a cheque is presented or when ECS is attempted and fails, it attracts a penalty charge.
- Pre-payment charges: These are the charges that are levied on the total outstanding loan amount when you wish to pay and close the loan account.
- Part-payment charges: If partial payment of the total loan amount is attempted, there is a percentage of charge that is applied.
Verification charges, services taxes, Amortization Schedule charges, Cheque/Instrument swap charges are other headings that might require you to pay an amount that might be added to your total loan amount or arranged to be paid as an additional charge.
Allied Charges on the personal loan
|Processing Fee||2.25% of principal + GST|
|EMI bounce Charges||Rs 400 – Rs 1000 per bounce + GST|
|Instrument change charges||Rs 500 + GST|
|Pre-payment charges||2% – 5% of outstanding principle + GST|
|Part payment charges||2% – 5% on the part payment amount|
|Foreclosure charges||5% + GST after a lock in period|
|Amortization schedule charges||Rs 200|
Please note that these are average amounts arrived at based on different bank charges
Banks and other financial institutions can change or completely waive off many of these charges, however, it is highly dependent on the negotiation capacity of the loan seeker. Be prudent to take notice of these charges and also their impact on the overall amount payable at the end of the loan term and also take corrective or management measures.