There are typically a number of costs associated with personal loans. These include standard fees such as loan processing fees and interest rates, as well as specialised fees such as online account access fees and EMI rejection fees. Before applying for a loan, it is always advisable to examine all of these fees in detail in order to facilitate proper financial management.
What is a Personal Loan?
Numerous institutions now offer personal loans to individuals, whereas in the past they could only be obtained from relatives and loan companies. These loans are granted immediately and do not require the submission of numerous documents or collateral. However, the CIBIL score plays a significant influence in determining interest rates.There are no restrictions on how the funds may be utilised. Since this is an unsecured loan, in which you are not required to provide collateral as security, your bank will assess certain fees and charges. According to the HDFC Bank website, the following fees are applicable to a personal loan and comply with KYC compliance standards.
Additional Read: How to Get Personal Loan with Low CIBIL Score? Know Everything
Common Fees and Charges Related to Personal Loan
1. Loan processing charge
While processing and approving your loan, the bank must pay some administrative expenses. This is normally a negligible sum that varies from bank to bank and typically costs between 0.5% and 2.50 percent of the overall loan amount. The minimum and maximum percentage of the loan processing fees that the borrower must pay are set by each bank.
2. Verification charges
Before approving a loan, a bank must be certain that you have the ability to repay it. In order to accomplish this, they pay a third party to verify your credentials. They review your credit history and loan repayment record. Because this is an additional expense that affects the bank, the borrower is responsible for covering it. This cost is considered a verification fee.
3. Penalty on EMI defaults
Banks permit you to repay the loan through affordable equated monthly instalments (EMIs). If your EMI payment is missed, you may be required to pay a charge. Therefore, instead of attempting to pay off the loan fast, choose an affordable EMI amount.
Additional Read: Everything you need to know about the charges associated with a Personal Loan
4. Duplicate statement fees
If you need a duplicate statement of your payment schedule or lose track of the total amount of the outstanding loan, you can obtain one from your bank. You can gain access to these details by paying a nominal fee to your bank.
5. GST
If the client requires additional services during the loan approval or repayment period, they must also pay a modest fee in the form of GST tax.
6. Prepayment/Foreclosure penalty
Your bank may incur a loss if you pay off your debt before the agreed-upon term, because you’ve already repaid the loan. Your financial institution may assess a prepayment penalty as recompense for this loss. Typically, a bank assesses a 2-4% prepayment/foreclosure fee.
Fees and Charges of Top Banks in India on Personal Loan
The fees and costs associated with personal loans at India’s leading banks are detailed below.
| Name of bank | Processing Charges | Pre-payment charges | Late payment charges |
| HDFC Bank | Up to 2.5% [Subject to a minimum of Rs.1,999 and a maximum of Rs.25,000] | For 13-24 months – 4% of the outstanding principalFor 25-36 months – 3% of the outstanding principalFor more than 36 months – 2% of the outstanding principal | On the overdue principal or EMI – 2% per month |
| Kotak Mahindra Bank | Up to 2.5% p.a. + GST | Lock-in period of 12 months, post 12 months – 5% charges for foreclosure + GST | 3% per month (compounded monthly) |
| The State Bank of India (SBI) | Nil to 1% of the loan amount – on the basis of the loan applied for | 3% for Xpress Power Loans, Xpress Credit group of loans, and Xpress Pension Loans | For each EMI dishonoured – Rs.500 + applicable tax |
| Yes Bank | Up to 2.5% of the loan amount [subject to a minimum of Rs.999 + tax] | For 13-24 months – 4% of the outstanding principalFor 25-36 months – 3% of the outstanding principalFor 37 to 48 months – 2% of the outstanding principalFor more than 48 months – Nil | 24% p.a. on the outstanding amount from the date of default |
| Union Bank of India | 0.5% of the loan amount [subject to a minimum of Rs.500 + GST] | – | – |
| Bank of Baroda | 2% of the loan amount + tax [subject to a minimum of Rs.1,000 and a maximum of Rs.10,000] | – | 2% on overdue amount |
| IndusInd Bank | Up to 2.5% of the loan amount + tax | Salaried: 4% of the outstanding principal, allowed after 12 EMIs.Self Employed: 4% of the outstanding principal, allowed after 6 EMIs | Rs.450 + tax |
| Bank of India | 2% of the loan amount + tax [subject to a minimum of Rs.1000 and a maximum of Rs.10,000] | For floating rate loans – NilFor fixed rate loans – 0.65% p.a. of the outstanding loan amount for the remaining tenure till maturity [subject to a maximum of 2.25% of the outstanding amount] | – |
| Dena Bank | 1% of the loan amount | Nil | – |