Service Charges And Fees Involved In Personal Loan

Service Charges Involved In Personal Loan

Whenever a Person Going To Get A Loan, They Pay Some service charges Along With Interest Rate, Without Knowing What it is you paying service charges to banks. This Article Will Help You To Understand About service charges And Fees In Personal Loan collected by bank, It Can Be Divide Into Two Parts I Am Going To Explain To You On First Type. We Will See On Second Type In An Other Post So Let’s Dive In.

Service Charges Involved Till Disbursal

  1. Interest Rates On The Personal Loan.
  2. Gap Interest Rate
  3. Processing Fee
  4. Insurance Coverage On The Personal Loan
  5. Franking Charges On The Personal Loan
  6. Facility Charges On The Personal Loan.
  7. Fraud Document Or Forged Documents Penalty

1.1 Interest Rates on Personal Loan :

All Banks And Financial Institutions Are Giving A Personal Loan To Salaried, Self-Employed And Professional Self-Employed Peoples And Their Interest Rate Range Starts From 10.75 % To 24 %. All Personal Loan Interest Rates Are Fixed. There Are Two Types Of Interest Rate Calculations Are There

  1. Reducing Balance Interest Rates
  2. Flat Interest Rate

Reducing Balance Interest Rates

On Reducing Interest Rate Method, Bank Charges Interest Rates On Outstanding Principal Loan Amount In Other Words Interest Amount Reduces As The Balance Of Borrowed Fund Reduces With Time On Continuous Repayment Of Principal Loan Amount.

For Example

If A You Availed Personal Loan For 5,00,000 At 14 % For 24-Month Tenure So Here You Have To Pay As EMI Rs 24006 On That Principal Amount Rs 18173 And Interest For 5 Lakh For 1 St Month Rs 5833.

After Paying 1 St EMI Principal Outstanding Amount Will Get Reduced From Rs 5,00,000 To Rs 4,81,827. Second Month Bank Charge Interest On Rs 4,81,827 Not On Rs 5,00,000

Flat Interest Rates On Personal loan:

A Flat Interest Rate Means The Amount Of Interest Is Fixed And Does Not Reduce, In Other Words, Pays Constant Interest Rate Till Maturity

Flat Interest Rates System Majorly Followed By NBFC Not By The Banks On Flat Interest Rate Systems Bank Or Financial Institution Charge The Interest Rate On The Availed Loan Amount Or Availed Principal Amount Till The End Of The Last EMI.

For Example

Consider A Loan Of Rs. 100000 At 12% Interest Rate Per Year Interest For 3 Years.

Flat Interest For 3 Years Would Be Rs. 36000 (1000000 X 12/100 X 3).

Total Amount To Be Repaid Rs. 136000.

The Monthly Installment Would Be 136000/36 = 3777.

1.2 Gap Interest Rates:

Let Take An Example Normally Bank Or Financial Institution Charge EMI Amount On Monthly Basis But Bank Follows Only Fixed EMI Dates, Generally Banks EMI Date Will Come On 1st, 4,5,10 And 15.

For 1st Month EMI Date May Occur Less Than 30 Days So Here Bank Follows Gap Interest Method So The Gap Interest May Adjust With 1st Installment Or Complete Tenure On Personal Loan.

1.3 Processing Fee On The Personal Loan

Financial Institutions Charges Processing Fee On Personal Loan Prices Starts From 0 To 2.5 % Of The Principal Loan Amount. It Is To Cover Up Cost Involved In The Process Of Personal Loans Like Document Collection, Verification Process And Salaries Of Who Involved In Process Of The Personal Loan.

However, If You Going To Get A Loan You Have To Pay Processing Fee Only For In Disbursal Time. In Case If Personal Loan Rejected Or You Don’t Want To Take It, No Need To Pay Any Processing Fee.You No Need To Pay Processing Fee From Your Hands Its Get Debited From The Loan Amount Itself.

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The Processing Fee Depends On Following The Parameters.

  1. Current Employer
  2. Availing Loan Amount
  3. Balance Transfer Or Top Up Personal Loan
  4. Net Salary Of The Applicant
  5. Salary Account Relationship

1.4 Insurance Coverage On Personal Loan:

Personal Loans Are Unsecured Loan So Banks And Financial Institution Tie Upped With Insurance Companies To Reduce The Risk Of The Loan. On Other Chapter We Will Have Complete Coverage About Complete Details. Normally This Is One Time Premium.

So You No Need To Pay Month On Month. And This Is Tax Benefit Too, The Insurance Premium Amount Will Differ Person To Person On The Basis Of Age, Loan Amount. However It’s Not Mandatory It’s An Optional If Anybody Forced To Avail It Ignore It.

1.5 Franking Service charges on personal loan:

Franking Service Charges Collected By NBFC On Personal Loan Agreements, Generally Its Around Rs 200- Rs 1000 , It’s Differ By NBFCs, It Can Be  Collect From Applicant As Cash Or Debited From Loan Amount.

1.6 Facility Service Charges on personal loan:

Some NBFC Having This Charges And They Will Not Disclose. For Facilitating Other Additional Services They Are Charging.

1.7 Fraud Documents Or Forged Documents Penalty on Personal Loan:

Now Days Banks Are Facing This Issue From Very Often, If A Person Applying Personal Loan and  He/She Involving Activities Such As Editing Pay Slip, Bank Statement, Altered Address Proof And Other Documents. Bank Has Rights To Take Legal Action On It .

They Charge Penalty On The Basis Of Loan Amount Its Around 2 % To 3 % Of Loan when go for personal loan, check the service charges and fees which is collect by banks then you apply.

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Read more: Personal Loan Balance Transfer, How Your Credit Card Repayments Works?What Are The Some Basic Criteria That Banks Check To Set Credit Limits To Their Customers?

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