How Much is a Personal Loan?

Personal Loan Costs

Personal loans are common and readily accessible, but pay attention to various rates, rates and penalties. When you’re uncertain of the prevalence of individual loans within your country, check this figure: the total number of unsecured installment loans stood at 16 million accounts in December 2018 and grew steadily by 29.3% YY according to the TransUnion CIBIL consumer credit repo. This shows that unsecured funding facilities bode well with growing people ‘s aspirations and consumerization. The increasing digitization of credit products also improves accessibility in an increasingly competitive market , which leads to the popularity of personal loans in India.

Despite its popularity, however, a personal loan remains a contoured product with several charges, charges and penalties. Factor in these will remain on top of your refund when applying for one. In fact, the applicable fees also vary from bank to bank, and depending on their creditworthiness, from the creditor to the creditor.

Let us therefore discuss the charges and charges for personal loans to help you evaluate the actual costs?

Charges for interest

Active interest rates for personal loans will vary from 10.99% to 24% p.a. on the amount borrowed for repayment in equal monthly installments under the tenure of the loan. For non-salaried borrowers, the upper limit may be slightly higher. In that respect, lenders take account of the applicant’s credit score, his / her bank relationship, and financial stability to assess the appropriate interest rate, among other items. It is advisable, before signing on the dotted line, to get full clarification about the effective interest rate on your loan, and to determine the feasibility of its monthly installments.

Tax on good services

The current GST for all loan-linked services is 18%. The following services include transaction fees, prepayment and partial payment fees, swap fees for repayment mode, cancellation charges, faulty repayment fees, repeat issuing statement fees, etc. Please notice that GST does not extend to interest rates on loans.

Fees for shipping

The loan processing fee can vary from 0.5 percent p.a., depending on your lender. And 3% of p.a. Sum of the loan plus 18% GST. If you apply for a lakh loan from Rs 1, and the lender charges 2% processing fee, your total processing fee would be: (2% of Rs. 1L) Rs 2,000 + (GST 18% of Rs 2,000) Rs 360 = Rs 2,360.

In addition, borrowers also restrict processing fees (for example, processing fees can not exceed Rs 10,000). Some banks also provide personal loans to some customers without payment of any processing fee. However, the repayment is often a non-refundable charge that is kept by the borrowers even though the loan has been cancelled after sanctions.

Prepayment / Conclusion fees

People are often forced to take personal loans in an emergency, but when they stabilize their finances after some time the challenge of interest payment and EMIs needs to be addressed over a long period of time. That is exactly why an advance payment incentive is useful when a personal loan is paid back. However, borrowers charge a prepaid fee to partly account for the revenue loss incurred by the decrease in the loan period. In fact, most borrowers have a 12-month lock-in period during which a personal loan can not be forfeited. After the lock-in duration, advance payments may be as high as 5% of the unpaid balance +18% of GST.

Prepayment charges are often lower if the credit maturity is close to the deadline. For example, if a 48-month loan is pre-closed at 37 months, a pre-payment fee of only 2 per 100 of outstanding balance+18 percent GST will be applied, but the fee will increase to 4 percent of outstanding balance+18 percent GST if the same loan is pre-closed at 15th month. In addition, some lenders charge a lower interest rate for fixed-rate private lending (like 0.65% p.a. on outstanding amounts + 18% GST).

Late payment extra interest and EMI bounce charges

It is worth emphasizing again the importance of assessing the affordability of your personal EMI loans before taking the plunge, as there are significant charges for missed or delayed payments. A number of borrowers charge the unpaid loan balance by 2-3 percent per month, or 24 percent per annum, as a late payment fee. Other banks charge for every dishonored EMI a flat sum (like Rs. 450-500), plus GST.

For through EMI bounce, most borrowers charge between Rs . 50 and Rs 400 plus 18 percent GST irrespective of repayment. These charges will burn a deep hole in your wallet, apart from reducing your score.

Swapping payments in repayment mode

If you change your payment method ( e.g. from check to auto-debit), this will usually also be charged. For each repayment mode swap during the tenure of the loan, lenders will charge about Rs 500 (plus 18 per cent GST).

Cancellation of loan charge

You might have to pay an annulment fee depending on your lender if you want to cancel a personal loan after its approval or disbursement. Many banks charge flat rate (such as Rs. 3,000) + 18% GST when a loan has been cancelled. Others do not obtain a flat cancellation fee, but charge the relevant interest between the loan disbursement and cancelled day and will not refund the processing cost. As such, it can be expensive before applying for a personal loan as a cancellation. You will also be well advised that you do not apply for multiple loans quickly, since this affects your credit.

Duplicate fees for reporting

At times, banks charge a fee for re-issues of loans-based documents such as statements, amortization index, NOCs, Credit Information Companies (CIC) Report anywhere from Rs 50 to Rs 500 (plus 18 per cent GST).

Additional charges

There are also some other relevant charges which rely on the lender, the repayment behaviour, the form of personal loan and even the place where the loan is approved. These costs include legal fees and taxes on stamps.

The aim here is to read the loan fine print and get full clarification on all relevant charges and fees before deciding. Any laxity in the payment of personal loans will contribute to debt accumulation and adversely affect your loan value. Therefore, be clever when choosing a personal loan and don’t miss a single refund.

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