As personal loans can be taken up without submitting any security or collateral, banks impose specific charges. Personal loans today are approved instantly without any heavy documentation or paperwork. In the case your personal loan application takes time, then you can check online for the personal loan application status. For instance, suppose you applied for an IDFC FIRST bank and are clueless about by when would you receive the loan proceeds in your account, then you can open the bank’s website to check the IDFC FIRST bank loan status.
Mentioned here are some of the personal loan charges you must be well-versed with before applying for the loan. However, before this let’s discuss what a personal loan is and how it works.
What’s a personal loan?
A personal loan is a credit option acquired from a financial institution. Such loans by nature are unsecured and hence zero security is required for availing the loan approval. The personal loan can be used for performing any personal or business financial mismatches. The loan repayment is usually in the form of an EMI that is disseminated across the loan repayment tenure. There’s a fixed rate of interest that’s charged on the personal loan amount.
How does a personal loan work?
Personal loans usually by nature are unsecured credit options. And hence, owing to their unsecured nature, such credit options are most favoured in the market. Such loan types do not attract any collateral or security and hence their non-repayment may not lead to losing out on any dear possession but might lead to legal fees and even a fall in your credit score. Credit score downfall may hamper your chances of availing loans in the future during unanticipated situations.
Also Check: IDFC FIRST Bank Loan Status
What is the personal loan-associated charges?
Loan processing fee
When your personal loan is processed by financial institutions, there’s a small fee that they incur as an administrative expenditure. This fee is charged for processing of the personal loan by the lender. Usually, the amount, which is inferred is minimal. The fee range anywhere from 0.5 per cent and 2.5 per cent of the overall loan proceeds. Every financial institution comes with a separate fee that is charged in the form of a processing fee.
Verification fee
When you take up a loan from a lender, the financial institution requires being sure regarding the fact that you must repay the outstanding loan due on time and according to the loan conditions. Owing to this process, the financial institution appoints a 3rd party to authenticate your credit past record and check your past repayment record. For this activity, financial institutions incur expenditures and hence, they appoint 3rd party. Thus, this fee is charged to you in the form of a verification fee.
Fee on default
Financial institutions allow you to make payments of the loan proceeds in the form of EMIs. Such instalments are determined based on the loan proceeds, repayment tenure and rate of interest. However, most importantly, they get determined based on the individual’s ability to repay the personal loan. At times you might select to repay the loan in shorter repayment tenure. At this phase, if you fail to pay in the form of EMIs, then financial institutions tend to charge a penalty on the amount. It is because of the default on the repayment of monthly EMI. Hence, you must always consider EMIs as per your affordability.
Prepayment charge
In the case you own funds that can be utilised for paying a specific personal loan that you have availed, then you can select to either repay timely or foreclose your loan. This practice is considered unpreferable by financial institutions as they lose out on their interest constituent from their loan proceeds. Thus, the financial institution levies a foreclosure charge that ranges anywhere between 2 per cent and 4 per cent of the loan proceeds. The foreclosure charge might even be based on the phase at which you take the decision to repay the loan.
Service tax
Financial institutions tend to offer distinct services to you as a customer during the loan time period and even for loan processing. Such services that are availed by you usually levy a tax. Thus, financial institutions tend to levy a service tax on the services offered to you as a borrower of the personal loan.
Duplicate statement charge
If you require any details linked with the repayment schedule or tend to lose repayment track performed to date, then financial institutions consider offering you some help for the same. Financial institutions levy a charge for offering you duplicate statements and various other crucial details. The charge is known as a duplicate statement charge. Also, you can check the loan amount that is outstanding by reviewing your bank statement. The financial institutions provide such statements in addition to documents associated with the personal loan.
Ending note
A personal loan is offered in the form of a lump sum payment and how you would use the loan proceeds is not decided by the financial institutions and lending institutions. You as an applicant might select to use the loan proceeds as you wish. You must always be aware of the fees that are charged and must ensure to question the authorities on any doubts because financial institutions might charge any hidden fees on the loan proceeds. To be aware of such charges and fees, you must closely monitor the statement of the loan and detailed documents offered by the lender.
Frequently asked questions on personal loan fees and charges that you must know –
Should you make payment of the upfront charge on a personal loan?
No, you must not pay any upfront charge on the personal loan. A regulated bank never levies a charge that requires being paid upfront by the loan applicant.
Is partial repayment permitted on a personal loan?
Yes, partial repayment is permitted in the scenario of a personal loan. A charge is levied on the same and it is permitted only after specific instalments are cleared by you.
Can non-payment of the loan impact your credit score?
Yes, non-repayment of the personal loan tends to impact your credit score and even your ability to avail credit in upcoming times.
