Know What is the Processing Fee For Personal Loan?
Personal loans are known to be the most sought-after loan product, and this can largely be attributed to their flexibility and free-form use. It is ideal to apply for a personal loan because this is an unsecured type of loan, i.e., you need not put up any collateral to avail of the loan. This comes in as a great relief for loan borrowers as most lenders don’t even ask for a third-party guarantor.
A sudden financial crunch, a need for a down payment towards your new home, repayment of mounting credit card bills, or needing cash for a medical emergency, no matter what, you can avail of the loan at ease and use it for any purpose. However, behind all these silver linings, there are also certain aspects of personal loans that every borrower must know before signing on the dotted lines.
Apart from understanding details of personal loans, calculating EMIs, checking on the tenure, discounted offers, pre-approved loan offers, etc., it is also equally important to be updated regarding processing, handling, and other loan-related fees that lenders charge. These charges often vary from lender to lender, and hence, approaching them individually to know their rates and charges is a must.
Different Charges and Fees for personal loan
You must ask your prospective lenders about the applicable fees and charges when deciding on the right lender for your needs. Sometimes borrowers end up opting for a lender who is offering a slightly lesser interest rate, like IIFL personal loan, but it’s also crucial to see if their processing fees, handling charges, and various other loan fees are equally low. Here is a list of different fees and additional charges that banks, NBFCs or other lenders can levy on the applicant seeking a personal loan —
- Verification charge: To be certain of the loan repayment capacity of the individual, banks often hire agencies to verify details of the applicant. The extra cost incurred on account of this verification run by the lender of your choice will be an additional charge that you will bear on behalf of the lender.
- Goods and Services Tax: For any kind of additional service, you request from the bank, be it before, during, or post your personal loan is sanctioned, the bank will charge you a small fee in the form of GST.
- Duplicate statement fee: If you ask for a copy of the duplicate statement, your bank can charge you a nominal fee to generate one.
- Prepayment or foreclosure penalty charge: Paying off your personal loan in advance or foreclosing it altogether before the loan tenure ends can incite a penalty charge, which is usually between 2% to 4% for most banks.
- Penalty on delayed EMI payment: If the applicant is unable to pay their monthly installments towards the personal loan on time, then it could attract a penalty, and this could also have an adverse effect on your CIBIL or credit score.
- Processing charge: When your personal loan is being processed, the bank, NBFC, or other lenders like IIFL personal loan, bear some cost that is related to administration and the amount can be anywhere between 0.5% to 2.50%. This type of charge varies from bank to bank and the applicant who is opting for the personal loan can either pay this processing fee straight away or opt for deduction of this fee from their loan amount when the amount is disbursed.
Plan your loan wisely with processing fees
Once you understand about the various charges and additional fees that a lender could levy, it is imperative that you reach out to various loan providers and request for their loan quotations.
- Different banks, NBFCs, and other lending partners will have different processing fees and other handling charges.
- Comparing loan offerings from different lenders will allow you to understand how much additional cost you will incur over and above the interest payable on your loan amount.
- You can shortlist the quotation and opt for a lender who doesn’t charge extremely high processing fees, handling charges, and various other application costs.
- Check for lenders that offer both ways of clearing processing fees – (i) paying cash to the lender up front, (ii) opting for a settlement of the processing fees in the loan amount itself, before it is disbursed by the lender.
- If you have an excellent credit score and are an ideal candidate, you could also negotiate on these additional fees and charges with your lender, like in the case of IIFL personal loan application. Often, lenders make exceptions for borrowers who have an excellent credit history. Hence, you can try this at the early stages of your loan application process.
Some lenders also allow you to settle your processing fee by allowing you to deduct it from your loan amount before disbursement. However, it is vital that you confirm this from the lenders of your choice and ensure that they have this facility. By deducting the processing fee from the sanctioned loan amount, the borrower need not worry about accumulating cash and paying the lender up front.
While processing fees and other handling charges don’t amount to much, it is important to know this beforehand. Read your personal loan documents and understand the terms and conditions in detail, and ask for a loan in charge at the branch, so as to know about these charges and be well prepared financially.