One of the greatest ways to get the money you need right away is with a personal loan. Examples include paying for wedding, home improvements or repairs, consolidating debt, a trip, or unexpected medical costs. Personal loans also include a processing charge, which is frequently non-refundable, in addition to the interest rate. Before applying for a loan, it is important to be aware of all the fees and charges that a personal loan may have in addition to the interest rate and processing fee. In order to determine the loan’s affordability and total cost, continue reading to learn about the processing fee for personal loans as well as any other fees and costs related to them.
The process for personal loans is straightforward, unlike those used to purchase a home or fund a college degree. Personal loans are a method to spend tomorrow’s money now. In actuality, you would have seen a lot of offers for a personal loan if you already had an account with a bank. The interest rates on these are far higher than, example, those on a vehicle loan, despite the fact that they are simple to obtain and provide virtually instant satisfaction. Personal loans are unsecured loans, which explain why. As a result, you don’t need to put up any assets, such as gold or real estate, in order to obtain the loan; it is not secured by any assets.
What are the Different Charges of Personal Loan?
- Processing Fees: Lenders bear some cost related to administration at the time of processing a personal loan. To cover this cost they charge a processing fee that usually varies between 0.5% and 2.50% of the loan amount sanctioned. The processing fee for personal loan varies from bank to bank. The applicant can either pay the processing fee straight away or get it deducted from the sanctioned loan amount at the time of its disbursement.
- Part Prepayment or Foreclosure Charges: Part prepayment means paying off a part of your outstanding loan amount whereas foreclosure means paying off the entire outstanding loan amount in one go before the tenure ends. Paying off the debt before tenure ends can cause the lender to incur a loss.
- The bank frequently imposes prepayment charges a penalty for partial and full prepayments to make up for the loss. This fee varies from bank to bank and often ranges from 2 to 4 % prepaid.
- Verification Fees: Before approving a loan, lenders must be certain that the applicant will be able to repay it on time. They have borrower verification with them for this reason. For the purpose of checking the qualifications of borrowers, they often employ a third party agency. These representatives are in charge of investigating the applicant’s credit history and credit repayment patterns. The loan applicant is required to pay the additional verification fee, which is included in the verification price.
- Duplicate Statement Fees: The lender may impose a cost for creating a duplicate statement detailing the loan’s repayment plan and outstanding balance. This charge varies from bank to bank and often costs between Rs. 200 and Rs. 500.
- Penalty on Late EMI Payment or Defaults: When borrowers choose a personal loan, they are obligated to return the loan amount through EMIs. There are penalties for late EMI payments and defaults (equated monthly instalments). The EMI payments must be made on schedule by the borrowers. A penalty of 2 percent to 3 percent per month on the missing or delayed EMI amount is assessed for defaulting on or postponing the EMI payment.
- Goods and Services Tax (GST): For any additional services requested, the applicant must pay a nominal fee in the form of GST.
Fees and Charges of Top Banks
|Banks/Lenders||Processing Fee||Prepayment Charges||Late Payment Charges|
|HDFC Bank Personal Loan||2.50%||2% to 4%||2% p.m|
|ICICI Bank Personal Loan||2.50% + GST||Up to 5% + GST||24% p.a|
|SBI Personal Loan||1.50% + GST||0.03||2% p.m|
How Can I Get A Personal Loan With The Lowest Interest Rate?
Here are some recommendations for getting the Lowest Interest Rate
- Improve Your Credit Score: If your credit score is good, you are likely creditworthy. For borrowers who have a strong credit score, banks and other financial institutions provide the lowest personal loan interest rates. So, before submitting an application for a personal loan, verify your credit score. If your credit score is below 750, you need to find strategies to raise it. If your credit score is higher than 750, your chances of obtaining a personal loan with a low interest rate increase.
- Avoid Skipping Repayments: Your credit score may be negatively impacted if you skip a loan or credit card instalment. Before setting your personal loan interest rates, lenders often consider your repayment history. It’s probable that the interest rate will be reduced for those who have previously made on-time EMI and credit card payments.
- Compare Interest Rates: Prior to requesting a personal loan from a certain bank, it is important to compare the interest rates that various banks and NBFCs offer for personal loans. This will enable you to obtain a personal loan at a reasonable interest rate.
- Negotiate with the Lender: If you are already a bank client or have an excellent working connection with the loan provider, you may bargain for the lowest interest rate. It is advised to accomplish this by sending the loan provider an official, written request.
- Watch Out for Offers: During celebratory times, banks and other financial institutions sometimes provide exceptional interest rates for a constrained window of time. If you apply for a loan when such an offer is active, you can be given a loan with a cheaper interest rate.
What is the average Interest Rate on Personal Loans?
Most banks charge personal loan interest rates between 10.50% to 24% p.a. The interest rate that you are charged will vary based on a number of factors such as your credit score, your income, the company that you are employed with, your age at the time of applying for the loan, etc. Thus, make sure to compare interest rates of different loan providers before applying for a personal loan.