Personal Loan Processing Fee

Following are the different fees and charges related to personal loan which are common to most lenders:

• Processing fees: Lenders bear some cost related to administration at the time of processing a personal loan. To cover this cost they charge a processing fee that usually varies between 0.5% and 2.50% of the loan amount sanctioned. The processing fee for personal loan varies from bank to bank. The applicant can either pay the processing fee straight away or get it deducted from the sanctioned loan amount at the time of its disbursement.
• Part prepayment or foreclosure charges: Part prepayment means paying off a part of your outstanding loan amount whereas foreclosure means paying off the entire outstanding loan amount in one go before the tenure ends. Paying off the debt before tenure ends can cause the lender to incur a loss. To cover the loss, the bank often charges a penalty for the prepayment (part and full), known as prepayment charges. This penalty usually varies between 2% to 4% of the amount prepaid and varies from bank to bank.
• Penalty on late EMI payment or defaults: When borrowers opt for a personal loan, they are required to repay the loan amount through EMIs (equated monthly instalments). Borrowers have to make sure that they pay the EMIs on time. Defaulting or delaying the EMI payment attracts a penalty ranging from 2% to 3% per month on the missed/delayed EMI amount.
• Verification charges: Lenders have to be assured about the timely loan repayment capacity of the applicant before they actually sanction the loan. For this purpose, they carry verification of the borrower. They usually hire a third party agency for verifying the credentials of borrowers. These agents are responsible to check the credit score and credit repayment pattern of the applicant. This extra cost of verification is covered under the verification charge and has to be borne by the loan applicant.
• Goods & Services Tax: The applicant has to bear a small fee in the form of Goods and Services Tax (GST) for any additional service required by them during the loan sanction or repayment.
• Fees for duplicate statement: A lender might also charge a fee for generating a duplicate statement of the repayment schedule and outstanding balance of the loan. Generally this fee ranges between Rs. 200 and Rs. 500 and varies from bank to bank.

Personal Loan Interest Rates offered by banks and other financial institutions are mainly decided by the borrower’s credit score, monthly income, age, employment status, and location. You can easily compare the latest interest rates of various private and public sector banks, non-banking financial companies (NBFCs), Small Finance Banks, and Micro Finance Institutions online on MyMoneyMantra. At present, personal loan interest rates vary between 8.45% and 24% per annum.