There’s one thing that bothers the borrowers a lot and that is what exactly the actual cost of a personal loan is? It may be noted that while opting for a personal loan, the lender levies certain charges including interest. Most borrowers are not aware of the additional fees and charges and only calculate the interest cost while planning to apply for an unsecured loan online. However, there are other charges, too, to be considered to make a budget and plan the finances accordingly.
So, before you opt for a loan, here’s a glimpse of applicable fees and charges to let you understand the actual cost of a personal loan.
Interest rates – Basically, rate of interest is the first point of concern while getting loan quotes. The rate of interest generally ranges between 11% and 20%, subject to applicant’s eligibility criteria and creditworthiness. Personal loan interest can cover up to 10% of the total loan repayment cost.
Processing fees – 1% to 2% of the loan amount is charged as processing fees to cover the administrative cost to process the loan application further. It is a non-refundable fee, i.e., even in case your application gets rejected, the lender would not refund the processing fee to the applicant.
Prepayment charges – In case you wish to close the personal loan account in lump sum before the tenure ends, the bank would levy prepayment or foreclosure charges against the outstanding loan amount. However, most lenders have a lock-in period of up to 6 to 12 months.
Loan cancellation – If you wish to cancel the loan application after the disbursal, then the lender would ask for the loan cancellation fees that can vary from bank to bank. So, it is advisable to be completely sure of applying for a loan, instead of simply adding fuel to the tough financial phase.
Switching repayment methods – Well, the lender surely gives you the flexibility to switch between the available repayment options, but, it will levy a certain charge against the request made.
Cheque bounce charges – Banks send alerts to have sufficient balance in the bank accounts before the EMI due date. So, if you fail to do so, the bank would charge cheque or instalment bounce penalty.
Hence, go through a thorough check-ins before making a final call.