What Hidden Charges Should You Expect With Personal Loans?
See the asterisk (*) and hashtag (#) symbol with your loan application on your apps? They are the best way to disguise hidden charges with your personal loan application. According to the TransUnion CIBIL Consumer Report of Q4 2018, there has been 29.3% YoY growth on total unsecured loans. Considering so many people are into this, it’s important to be aware of these hidden charges.
Processing Fees: This is the most common hidden charge which comes up with your personal loan apps. This is either charged upfront or is deducted from the disbursed loan amount. This fee is generally non-refundable and is not minimal. It is somewhere between 2% and 3% of the application amount. These costs certainly increase the repayment amount rather than easing your financials.
Cancellation Charges: Today, this has become a feature of every kind of service you avail of, be it flights and train bookings or availing a personal loan. The charges vary from institution to institution. They can start somewhere at flat Rs. 1,000 to around Rs. 3,000 with an additional 18% GST is charged. Some institutions may not charge a flat fee but will charge the applicable interest rate between loan disbursal and cancellation days.
Prepayment penalties: Remember, as a customer, personal loans could be a trap. Anything more than the EMI amount may get you penalties of 2-5% of the outstanding loan amount. Why do prepayment penalties exist? According to the financial institutions, they lose on the interest rate they would get if the repayment is made as per schedule.
Late payment charges: This is a no-brainer. If you default on your payments or get late with repaying your EMIs, you will be penalized. Perhaps ironically, neither can you repay your loan amount before time, nor can you do that after time. The late payment fees may go up to 2-3% of the EMI amount. This means you might pay more interest on your late fees than your actual loan!
Effective interest rates: The effective interest rates on personal loans range anywhere between 10.99% and 24% p.a. The upper limit might go higher in the case of non-salaried individuals too. Further, other factors like credit score, relationship with the bank, and financial stability help in determining the applicable interest rate.
Repayment mode swapping charges: If the mode of repayment is suddenly swapped, say from paying via cheque to auto-debit, you will be charged for this too. Lenders usually charge around Rs. 500 + 18% GST as the swapping charge during the loan tenure.
Duplicate documentation charges: The financial institution would charge some extra fee for reissuing loan-related documents. These can include statements, NOCs, credit reports, etc. It is generally charged somewhere between Rs. 50 to Rs. 500 (plus 18% GST) for duplication.
Other charges: There could be various applicable charges depending upon the lender. This might be based on the type of lender, customer’s repayment behavior, types of loan sanctioned, or even the place from where it is sanctioned. They might also charge for stamp duties and other legal charges.
GST: Earlier, it was the service tax and VAT that were applied on loan-related services. Now, it’s the Goods & Services Tax (GST). This is barely ever mentioned in the loan documentation process but suddenly arises during the payment. The amount in India is relatively high, as the standard is 18% on any loan processing service. This means on every 100 rupees you are told about, an additional rupees 18 rupees is added in the form of GST.
EarlySalary to your rescue
India’s Largest instant personal loan platform, EarlySalary ensures that money isn’t diverted on some pretext or the other. Especially on hidden charges. The idea is to build a borrowing experience that encourages folks to see loans as an enabler for aspirations, not a last-ditch attempt when no other options are available. Here’s how EarlySalary achieves this:
The loan amount can be availed up to Rs. 5 lakh
Interest rates that are highly competitive, and depend on your holistic borrowing profile and not just your credit score!
Processing fees up to only 1.50%
Prepayment charges are NIL
Repayment instrument swapping at only up to Rs.250 per rejection
A flat, minimal Rs.500/month per default on payment dishonors
Remember, before you avail of your personal loan, ask for all information and research from several sources. This will help you in making an informed decision and selecting the best personal loan option.