Personal Loan Fees and Charges

 

Personal Loan Fees and Charges 

Personal loans are one of the best financial tools which can be used by an individual to meet his/her expenses. However, a personal loan is not only about the interest which is charged on the loan amount. There are a few other fees and charges which should be taken into consideration.

Thus, it is important to ascertain the affordability or the overall cost of a loan only after considering the fees and charges that are associated with it.

Common Charges and Fees Related to Personal Loan

The charges and fees that are related to personal loan can be listed down as follows:

  • Processing charges: At the time of processing a loan, a bank will be bearing some cost related to administration. This amount is quite small and often varies between 0.5% and 2.50%. The processing charges for personal loan will vary from bank to bank. The individual applying for a personal loan can choose from: (I) paying the processing fee straight away, or (II) having the processing fee deducted from the actual loan amount at the time of its disbursement.
  • Verification charges: A bank will have to be assured about the loan repayment capacity of an individual before they actually disburse the loan. For the purpose of verification, the bank usually hires an agency (third party) for verifying the credentials. These agents check the credit scores and credit repayment patterns of the individual who has applied for the loan. This extra cost incurred on part of the bank for the purpose of verification is known as the verification charge. This charge has to be borne by the applicant of the loan as it is an additional cost for the bank.
  • Goods and Services Tax: For any additional service which is required by the loan applicant during the sanction of a loan or during the period of repayment of the loan, a small fee has to be borne by him/her against the service in the form of Goods and Services Tax or GST.
  • Penalty on late payment of EMIs (defaults): When an individual opts for a loan, he/she is required to repay the loan amount in the form of EMIs or equated monthly instalments. It is the responsibility of the borrower to make sure that the EMIs are paid on time. Defaulting the payment of an EMI would attract a penalty. Thus, it is always important to calculate the EMI amount in advance and plan the finances and tenure for the loan accordingly.
  • Penalty for prepayment or foreclosure of loan: Foreclosure of a loan stands for the repayment of the loan amount before the stipulated tenure of the loan. Paying off the debt before time might cause the bank to incur a loss. In order to make up for the loss, the bank might charge a penalty for the prepayment. This penalty is usually charged at the rate of 2% to 4% and varies from bank to bank.
  • Fees for duplicate statement: A bank might charge a fee for generating a duplicate statement of the schedule of payment and outstanding balance of the loan. This fee generally ranges between Rs.200 and Rs.500. This fee also varies from bank to bank.

Fees and Charges of Top Banks in India

The fees and charges in relation to the personal loans for the top banks in India are listed below:

Name of bankProcessing ChargesPre-payment chargesLate payment charges
HDFC BankUp to 2.5% [Subject to a minimum of Rs.1,999 and a maximum of Rs.25,000]
  • For 13-24 months – 4% of the outstanding principal
  • For 25-36 months – 3% of the outstanding principal
  • For more than 36 months – 2% of the outstanding principal
On the overdue principal or EMI – 2% per month
ICICI BankUp to 2.25% p.a. + GST5% p.a. of the outstanding principal + GST24% p.a. on the outstanding amount from the date of default
Kotak Mahindra BankUp to 2.5% p.a. + GSTLock-in period of 12 months, post 12 months – 5% charges for foreclosure + GST3% per month (compounded monthly)
The State Bank of India (SBI)Nil to 1% of the loan amount – on the basis of the loan applied for3% for Xpress Power Loans, Xpress Credit group of loans, and Xpress Pension LoansFor each EMI dishonoured – Rs.500 + applicable tax
Yes BankUp to 2.5% of the loan amount [subject to a minimum of Rs.999 + tax]
  • For 13-24 months – 4% of the outstanding principal
  • For 25-36 months – 3% of the outstanding principal
  • For 37 to 48 months – 2% of the outstanding principal
  • For more than 48 months - Nil
24% p.a. on the outstanding amount from the date of default
Union Bank of India0.5% of the loan amount [subject to a minimum of Rs.500 + GST]--
Bank of Baroda2% of the loan amount + tax [subject to a minimum of Rs.1,000 and a maximum of Rs.10,000]-2% on overdue amount
IndusInd BankUp to 2.5% of the loan amount + tax
  • Salaried: 4% of the outstanding principal, allowed after 12 EMIs.
  • Self Employed: 4% of the outstanding principal, allowed after 6 EMIs
Rs.450 + tax
Bank of India2% of the loan amount + tax [subject to a minimum of Rs.1000 and a maximum of Rs.10,000]
  • For floating rate loans – Nil
  • For fixed rate loans – 0.65% p.a. of the outstanding loan amount for the remaining tenure till maturity [subject to a maximum of 2.25% of the outstanding amount]
-
Dena Bank1% of the loan amountNil-

A GST rate of 18% will be applicable on banking services and products from 01 July, 2017.

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