The year 2021 witnessed a sharp revival of collateral-free personal loans in India. According to data released by the Reserve Bank of India, the total credit outstanding in this category increased to Rs. 29.18 lakh crore in September 2021.
The high demand is primarily because of personal loans’ unrestricted end-use, affordable interest rates, and flexible terms and conditions. As a consumer, if you want to enjoy the best deal on this unsecured credit, you must assess the personal loan processing fees and other charges that impact your affordability.
Know About Personal Loan Processing Fees and Additional Charges
When you avail of a personal loan from reputed NBFCs, you will be liable to pay certain charges that contribute to the total cost of borrowing. Let’s check them out:
Processing fees include all the costs of processing an application, such as resource, administration, and credit inquiry costs. Note that personal loan processing fees depend on the lending institution. In the case of a leading NBFC, these fees usually go only up to a maximum of 4% of the loan availed. Taxes are levied separately.
Borrowers can pay the processing fees straight up or get them deducted directly from the approved fund before transferring it to their accounts.
Rate of Interest
The interest rate is a significant component forming the EMIs paid towards loan repayment every month. Consumers have to pay this charge against the total credit borrowed. Different lenders offer varying rates of interest based on factors like the applicant’s eligibility, repayment capability, loan amount, company’s terms and conditions, etc. As a borrower, you must look for the lowest rates available in the market to keep the cost of the loan affordable.
NBFCs in India bring the most competitive personal loan interest rates, ensuring affordability. Their rates typically start from as low as 13%. You can check out how to avail better interest rates on your personal loan.
Penal Interest Charges
Penal interest charges are imposed when borrowers fail to pay a loan EMI on time. Reputed lenders usually levy 2% – 4% every month on the outstanding EMI. Note that the duration considered in this case is from the date of default to receipt of the due EMI.
Hence, it is recommended to pay the personal loan EMIs on time to avoid incurring penalty. This is one of the many ways to improve your CIBIL score and keep your credit profile clean.
Many people often get confused between penal interest and bounce charges. While penal interest is the penalty for defaulting on EMIs, bounce charges are imposed when an EMI bounces mainly due to insufficient balance. Borrowers may have to pay around Rs. 600 – Rs. 1,200 for every bounce. Hence, it is imperative to keep sufficient balance in the dedicated account from where monthly installments are deducted every month.
As a borrower, you need to pay part-prepayment charges if you pay off a certain amount of your outstanding principal with excess funds. Part-prepaying reduces not only the total principal but also the EMI on the credit. The charges are quite low with reputed lenders, up to 2%, along with taxes applicable.
Borrowers often require physical copies of various critical loan-related documents and statements, such as the statement of account, foreclosure letter, no dues certificate, repayment schedule, interest certificate, etc. A statement charge of Rs. 50 (tax inclusive) is applicable for directly availing each of these vital documents from the lender’s branch.
However, the Personal loan statement charges for online copies are zero. A borrower simply needs to download the required statement from their customer portal.
If a borrower wants to foreclose a personal loan in one go, he has to pay a nominal foreclosure charge for the facility. It doesn’t matter whether he has opted for a floating or a fixed rate of interest. However, it is mandatory to pay at least one EMI. Leading NBFCs usually charge a foreclosure fee of 4% along with applicable taxes. Here’s the complete guide to personal loan foreclosure.
Once you get all the charges, you can easily apply for a collateral-free personal loan from lenders via an online application.
For existing customers, the process of taking loans is easier and less time-consuming through pre-approved offers. Pre-approved offers apply to a host of financial products, such as personal loans, business loans, etc. To check your pre-approved offers online, all you have to do is provide your name and phone number.
Knowing the personal loan processing fees, interest rates, and associated charges is essential to evaluate the total outflow towards loan repayment. This helps in informed decision-making and calculated repayment planning. Approach the best financer in the industry to enjoy the most affordable personal loan in India.