Personal Loans support your financial needs at times when you require it most, such as, a wedding, a vacation, a medical exigency or any other personal need. As personal loans are unsecured loans, they carry a high rate of interest. They also involve a range of charges and fees that are charged by the bank/financial institution and are mentioned in your loan agreement, but these fees and charges are often overlooked. Here are some of the overhead charges that you must familiarize yourself with:

1. Loan Processing Fees –Processing fees or a loan application fee is a charge made to you by a bank for processing your loan application. This fee is usually charged in order to cover the administrative costs of the bank, any credit score checks done for you in relation to your loan application, amongst others. Processing fees are a standard fee that is charged by most banks and financial institutions. However, some banks often waive processing fees for highly eligible customers or esteemed clients as a goodwill gesture and also to attract customers. Processing fees for personal loans are usually charged by banks on the percentage of the loan amount and usually fall under 1 percent to 6.50 percent, depending on individual loan application. The lower the processing fee, the better advantage you have towards savings on your loan application fees.

2. Advance Prepayment Charges –Prepayment is when a borrower pays off full or partial loan due before the loan closure date. Some banks allows advance prepayment however they levy a penalty on it that is charged either charged to you at a flat rate or a cumulative interest. The actual charges differ from each bank and are determined according to their internal bank policies. You can either ask your bank for that information beforehand or you will find that information specifically mentioned in your personal loan agreement.Some banks offer advance prepayment only after a certain time frame to make sure they capitalize on the interest earned every month in the initial EMIs of the loan. Banks such as Standard Chartered, Citi, Kotak, ICICI, Tata Capital, HDFC, AXIS, IndusInd, SBI, etc. offer advance part payment facility.

3. Foreclosure Charges –Some banks allow foreclosure of a loan, provided the full payment is made. However, they charge a foreclosure fee for approving a foreclosure. While some banks allow no penalty on foreclosure, it is best to check with your bank on their loan foreclosure policy. Some banks and independent financial institutions also offer a foreclosure calculator that you can use to estimate the total amount you will have to pay if you choose to foreclose a loan. Axis bank and State Bank of India are some of the few banks that do not charge any foreclosure fee for a personal loan.

4. Defaulter Charges –In case you miss any EMI or pay the EMI late, the bank charges a penalty for that which is also known as defaulter charges. Default charges often include the EMI amount, additional interest and collection costs to avoid any penalty. Such charges are subject to bank’s internal policy and you will find this information in your loan agreement or at the bank’s website. You may also contact the bank directly to know this information.

5. Document Charges – Document charges are stamp duty and loan registration fees that are charged by banks to process and disburse your personal loan application. Document charges keep changing according to the loan amount and are determined individually as applicable to the individual. Some banks often waive off document charges to attract borrowers. You can contact your bank directly for this information.

6. Hidden Charges – It often happens that you are provided specific loan details such as loan amount, tenure and rate of interest. However, to make yourself aware of any hidden fees and charges is also crucial. If the bank upfront has not disclosed any hidden charges, look for them in your personal loan agreement as that is a binding legal agreement between you and the bank and will have the full charge disclosure. This is the reason why you must always read the loan agreement and its terms and conditions thoroughly before you sign.

Letzbank is a financial website that allows you to not only check your personal loan eligibility but also apply for personal loan directly at their website. One of the benefits is also the waiver of service charges on loan applications that get submitted directly at Letzbank website. So go ahead and find the best personal loan deals, all at one place, only at Letzbank!

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