It is more profitable to be wiser than to be a fool. The same applies when you want to seek a Personal Loan. There are a lot of things which you need to take into consideration. Apart from the fact that it is expensive to procure one, availing the service of Personal Loan can prove to be detrimental to your finances if you do not plan.

More often than not, we have a habit of not reading the loan document carefully. The actual cost which you incur is seen only after you consider the various other charges that are applied. If any individual who is looking out to apply for a Personal Loan wants to accurately compare different types of Personal Loans offered by different lenders, they must consider these charges that are applied to see the actual cost.

An example of this would be the prepayment charges or the processing fee which is applicable for a Low Interest Rate Personal Loan which will vary from the charges applicable on a housing loan. Such charges play an important role while a customer makes up his/her mind regarding the type of Personal Loan that they need to take, as it must ensure the least percentage of interest needs to be paid, while it suits all your needs.

Given below is a detailed list of the various types of charges which are applied prior to the loan being disbursed, the charges that are applicable through the duration of the loan, and eventually, the charges that are applied after the loan is terminated:

1) Processing fee

2) Late payment charges

3) Prepayment fee

4) Documentation charges

5) Service tax/GST

6) Duplicate statements charges

7) Cheque bounce charges

Processing fee:

Whenever you apply for a Personal Loan, the bank is bound to charge you a fee which is known as the processing fee. This is the amount charged by the banks to cover the costs incurred while processing the application of your loan. These processing fees are different for every bank, some banks make you pay it prior to the loan being sanctioned, the fee is charged upon you when you apply and submit the application for the loan.

Generally, the processing fee is a particular percentage of the total loan amount. This percentage is fixed between 1-2 percent for a low interest rate Personal Loan while there are certain lenders who impose a flat charge up front, this charge is usually Rs. 1,000 or Rs. 2,000, and then they deduct the remainder processing fee (if applicable) from the amount of the loan, prior to disbursal.

In almost all cases, the processing fee is not refundable. While there are certain banks that commit the refund of the processing fee in the eventuality of the loan not being sanctioned, it’s suggested that one must have a written assurance from the bank, as refunding the processing fee is technically impossible.

Late payment charges:

In the eventuality of the monthly installment towards the repaying of a loan being delayed, late payment penalty charges will be charged by the bank above the installment charges. Also known as delayed payment charges, in certain cases, it is also known as overdue payment charges. When you are signing the loan contract, these charges are fixed.

This late payment charge is applicable if you pay after the date when it was due. Overdue payment charges are in the range of 2-3% of the EMI.

Pre-payment fee:

In case the borrower decides to foreclose the loan prior to its actual tenure, the borrower needs to pay a penalty. This penalty that the borrower is made to pay is known as pre-payment Fee. Mostly, it is from the outstanding principal of the loan amount that the pre-payment fee is imposed as a certain percentage. Every bank has a different method of charging the pre-payment fee, but usually, the fee is in the range of 2-5% of the remaining loan amount.

Documentation charges:

Whenever you submit your Documents for the Application of your Personal Loan to be considered, there is a verification process that is undertaken by lenders, they often make use of third-party agencies to do so. The expenses that are incurred by the lender are usually passed to the customer, in the range of Rs. 500 – Rs. 1,000 per case.

Service tax/GST:

Service tax or GST is imposed on service providers that have an annual turnover of greater than Rs. 8 Lakhs. It is within the purview of the tax officials.

Duplicate statements charges:

The repayment schedule after sanctioning of the loan is determined by the lender. If this statement was to be misplaced by you, you could always ask the bank to issue you a duplicate one, but this is charged anywhere between Rs. 100 to 500. The statement shows you the balance amount of the loan and the EMIs that yet remain to be paid.

Cheque bounce charges:

When a cheque that has been handed over for clearance has an amount mentioned greater than the total available balance, it is called as a cheque bounce. Various business establishments call a cheque bounce as a dishonored cheque. In the eventuality of you having handed over post-dated cheques to the lender so that your bam account is debited after a specific interval, you should make sure that you have the required money every month, in your account. If even one cheque bounces, the bank shall charge anything in between Rs. 250 – Rs. 500 as a penalty.

Most of the above charges need to be considered when the individual applies for a Personal Loan, as it is after consideration of these seemingly small charges that the true cost of the Personal Loan is revealed. Over and above that, these small costs ensure that the entire method of repayment is undertaken by the individual seriously and the entire machinery continues to operate seriously.