Personal Loan Interest Rates and other Charges that Every Borrower Should Know About
While the interest rate is the most important thing to know about a personal loan, there are also a few additional charges that a borrower should know about. Find detailed information about the interest rate and other fees in this post.
A personal loan is one of the best ways to fulfil your unplanned and emergency financial needs. But just like any other type of loan, there are many important things that a borrower should know about when taking a personal loan.
While most borrowers only focus on the interest rate of their loan, there are some other charges and penalties that one should know about. Continue reading to know the interest rate and additional charges of a personal loan.
Interest Rate of a Personal Loan
As a personal loan is an unsecured type of loan which does not require any collateral, it is more expensive than secured loans like a car loan or home loan. Most lenders offer personal loans from 13% onwards. Factors like your credit history, age, loan amount and tenure, and employment are taken into consideration to calculate the personal loan interest rate.
Note that based on the factors mentioned above, the interest rate on a personal loan taken by two borrowers can be different.
Loan Processing Charges
When you apply for a personal loan, the lender charges something known as loan processing charge. It is a fee charged for processing your loan.
This is generally around 2% of the loan amount but can vary between lenders. You’ll also be required to pay GST (currently 18%) on top of this loan processing fee.
If you’re planning to take a personal loan, you should also know about the different penalties that you might be required to pay.
Most of the lenders have late payment charges, penal charges, and penalty on default of any amount payable to the lender. Such penalties are generally 2% of the amount owed. But just like other charges, these penalties too vary between different lenders.
There are also charges for bouncing/dishonour of cheque, document retrieval, SI/ECS dishonour, duplicate state, and duplicate repayment schedule.
Most of the lenders charge a flat fee of up to INR. 500 in such cases. You’ll also be required to pay GST on this additional fee.
Apart from personal loan interest rates, another amount fee that you should know about is the foreclosure fee. Lenders now also allow you to foreclose a loan before the actual repayment tenure. While the terms and conditions for foreclosing a loan are different between lenders, most of them charge a foreclosure fee. This can be up to 6% of the remaining principal amount.
While the interest rate is definitely the most important consideration when taking a personal loan, there are a few other charges that every borrower should know about too. Make sure that you check these charges when discussing your loan with the lender and confirm the same on loan documents before signing the loan documents.