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Loan Charge & Fees
Loan charges can be painful if you are not aware of. Various Banks has different loan charge. Personal loans are one of the greatest financial instruments that an individual may utilize to fulfill his or her needs. However, a personal loan is not only about the interest which is charged on the loan amount. There are a few more fees and expenses that should be considered.
As a result, it is critical to determine the affordability or total cost of a loan only after considering the fees and charges associated with it.
Table of Contents
Bank loan is a current liability
It is determined by the reason for which the loan was obtained, as well as the loan’s repayment duration. If the debt must be paid off within a year, it is classified as a current obligation; if the repayment is anticipated to take more than a year, it is classified as a non-current liability.
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Fees and other Loan Charge Associated Personal loan
The following are the costs and fees associated with a personal loan:
Processing fees:
A bank will incur certain administrative costs while processing a loan. This quantity is relatively tiny, often ranging between 0.5 and 2.50 percent. Personal loan processing fees differ from one bank to the next. When applying for a personal loan, the applicant has two options:
- pay the processing charge right immediately, or
- have the processing cost taken from the loan amount at the time of distribution.
Verification fees:
Before a loan is disbursed, a bank must be satisfied of an individual’s ability to repay the loan. The bank generally engages an agency (third party) to verify the credentials for the purpose of verification. These agents investigate the applicant’s credit ratings and credit payback history. The verification charge is the additional expense spent by the bank for the purpose of verification. This fee must be paid by the loan applicant because it is an additional expense to the bank.
Goods and Services Tax (GST):
For any additional service requested by the loan applicant throughout the loan’s approval or repayment period, a modest cost in the form of Goods and Services Tax (GST) must be borne by him/her against the service.
Penalty for late EMI payment (defaults):
When a person takes out a loan, he or she is expected to return the loan amount in the form of EMIs, or equated monthly installments. It is the borrower’s obligation to ensure that the EMIs are paid on time. A penalty would be imposed if an EMI was not paid on time. As a result, it is always necessary to determine the EMI amount ahead of time and arrange the funds and loan tenure properly.
Penalty for prepayment or foreclosure of loan:
Foreclosure of a loan refers to the repayment of the loan amount prior to the loan’s stated term. Paying down the loan ahead of schedule may result in a loss for the bank. To compensate for the loss, the bank may levy a penalty for prepayment. This penalty is often imposed at a rate ranging from 2% to 4% and varies per bank.
Duplicate statement fees:
A bank may charge a fee for creating a duplicate statement reflecting the loan’s payment schedule and outstanding balance. This charge is usually between Rs.200 and Rs.500. This charge varies from bank to bank as well.
Fees & Charges of India’s Top Banks
The following are the fees and charges associated with personal loans for the main banks in India:
| Name of bank | Late payment charges | Processing Charges | Pre-payment charges |
|---|---|---|---|
| HDFC Bank | On the overdue principal of the loan or EMI – 2% per month | Up to 2.5% [Subject to a minimum of Rs.1,999 and a maximum of Rs.25,000] | For 13 to 24 months – 4% of the outstanding principal. For a period of 25-36 months – 3% of the outstanding principle. For periods of more than 36 months - 2% of the outstanding principal. |
| ICICI Bank | 24% p.a. on the outstanding amount from the date of default | Up to 2.25% p.a. + GST | |
| IndusInd Bank | Rs.450 + tax | Up to 2.5% of the loan amount + tax | Salaried: 4% of the outstanding principle, payable after 12 EMIs. Self-Employed: 4% of outstanding principal, permitted after 6 EMIs. |
| Bank of India | - | 2% of the loan amount + tax [subject to a minimum of Rs.1000 and a maximum of Rs.10,000] | Nil for floating-rate loans. For fixed-rate loans, the rate is 0.65 percent per annum of the outstanding loan amount for the remaining duration until maturity [up to a maximum of 2.25 percent of the outstanding amount]. |
| Dena Bank | - | 1% of the loan amount | |
| Kotak Mahindra Bank | 3% per month (compounded monthly) | Up to 2.5% p.a. + GST | |
| The State Bank of India (SBI) | For each EMI dishonoured – Rs.500 + applicable tax | Nil to 1% of the loan amount – on the basis of the loan applied for | |
| Yes Bank | 24% p.a. on the outstanding amount from the date of default | Up to 2.5% of the loan amount [subject to a minimum of Rs.999 + tax] | For 13 to 24 months – 4% of the outstanding principal. For a period of 25-36 months – 3% of the outstanding principle. For 37 to 48 months - 2 percent of the outstanding principal. Nil for more than 48 months. |
| Union Bank of India | - | 0.5% of the loan amount [subject to a minimum of Rs.500 + GST] | |
| Bank of Baroda | 2% on overdue amount | 2% of the loan amount + tax [subject to a minimum of Rs.1,000 and a maximum of Rs.10,000] | - |
Table A GST of 18% will be levied on banking services and products from July 1, 2017.
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