Personal Loan charges you must be aware of
A Personal Loan is the right solution for you when you need some extra cash. However, before you apply for one, it is important to understand various charges associated with the loan. These processing fees can add up into the amount of money you are borrowing. This blog post will discuss the processing fee and other charges you can expect when you take out a Personal Loan. So, if you are thinking about taking out a loan, make sure to read this post.
What is a Personal Loan?
A Personal Loan is an unsecured loan that you can use for any purpose. The processing fee for this loan is usually between 0.50% to 2% of the total loan amount. You can avail a loan from ICICI Bank by using the online application process. When you apply for a Personal Loan, the lender will check your income and other factors to determine your eligibility.
They will offer you a loan at a certain interest rate if you are eligible. The interest rate on a Personal Loan depends on several factors, such as your credit score, income and employment history.
Charges of a Personal Loan
Mentioned below are the charges you must be aware of before availing a loan:
1. Processing fee
The bank charges a processing fee for processing your loan application. It is a one-time fee and is generally a certain percentage of your loan amount. For example, if you take a loan of Rs 50,000 for a tenure of one year, the processing fee for a Personal Loan charged may be Rs 500 to Rs 2,000.
While some banks do not charge processing fees, others may charge a processing fee on an instant Personal Loan basis. Hence, it becomes crucial that you check with your bank or lender about this fee before availing the loan.
2. Prepayment/Foreclosure Penalties
Most lenders will charge you a fee if you choose to prepay or foreclose on your loan. This is because they lose out on the interest payments they would have otherwise received. Foreclosure charges are also levied by banks if you choose to close your loan before the tenure is up. These charges are typically 5% of the total outstanding amount, including GST, and are applied immediately upon closure of the loan account. ICICI Bank charges zero fees if a salaried individual chooses to prepay the amount after paying 12 months of EMI or if it is done using the customers' own funds in the case of MSME.
3. Loan Cancellation Penalty
If you cancel your loan within a certain period after taking it out, you may be charged a loan cancellation penalty, which could be around Rs 3,000 plus GST.
4. Repayment mode Switching Charges
Some banks will charge a processing fee if you want to change your repayment mode from EMI to bullet repayment or vice versa. This processing fee is generally around Rs.500 per transaction, including GST.
The Bottom Line
When taking out a Personal Loan, it is essential to be aware of all the potential charges that could come with it. Processing and an instant Personal Loan fees can add up, so make sure you understand all the terms and conditions before signing on the dotted line.
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