A myth about personal loan charges or fees in India


Personal loans accounted for a 41.6% incremental growth in non-food credits during the financial year 2017-18. The popularity of such advances can be attributed to its unsecured nature, as well as the fact that it can be utilised in any way borrowers deem necessary. It is an ideal funding method which helps in meeting all urgent funding needs of individuals. Nonetheless, there are several myths regarding personal loan processing charges which often restrict prospective borrowers from availing such financial products.

Demystifying personal loan charges

  • Myth 1 – Lower interest rate is equivalent to the best personal loan

Fact – Look into other associated expenses as well.

Many financial institutions often hesitate to disclose actual processing charges involved in the approval of personal loans, putting forward a false notion of the reduced cost of borrowing. Borrowers often realise such hidden fees later, after availing the funds. This increases the cost of borrowing, often discouraging individuals from availing such credits again in the future.

To avoid such circumstances, individuals should look into all associated charges levied by lending institutions for an accurate idea about the actual cost of borrowing and other additional costs of repayment. In this regard, individuals should be aware of the following personal loan charges, apart from interest rates applicable –

  • Processing fees.
  • Bounce charges.
  • Penal charges.
  • Document or statement charges.
  • Foreclosure charges.
  • Prepayment expenses.
  • Balance transfer expenses.
  • Duplicate statement issuance expenses.

Loan charges in India differ among various financial institutions. Applicants should carefully analyse the same, and opt for one which effectively reduces their total repayment liability.

Myth 2 – Personal loan charges are constant and mandatory.

Fact – It is based on the loan value.

Processing fees, bounce, and penal charges are levied as a percentage of the total loan value. Also, individuals can often forego the document and statement generation charges if they keep track of their loan repayment status through the official app of the respective financial institution.

Timely repayment of all EMIs ensures zero bounce and penal charges, helping avoid related fees with ease. No unnecessary financial burden is levied on a borrower if he/she avoids terms which can lead to incurring penal charges.

Myth 3 – Individuals having a lower CIBIL score are not eligible for personal loans

Fact – Personal loans are approved at higher interest rates.

Personal loans are usually extended to applicants having a CIBIL score of higher than 750. This, however, does not mean that individuals having a lower CIBIL score may not be able to avail a personal loan. Applying personal loan for low CIBIL score with a co-applicant, providing a guarantor, reducing FOIR before applying, etc. increase the chances of loan approval, despite having a low or unaccounted (in case of individuals having no credit history) credit score.

Individuals having a credit score lower than 750 can avail personal loans at competitive processing charges and other associated costs. Only interest rates levied on advances to such applicants are relatively higher. A higher interest rate is levied to mitigate the risk factor of lending financial institutions.

Myth 4 – Processing, foreclosure or part prepayment charges are substantial

Fact – Loan charges India depend on respective financial institutions

NBFCs such as Bajaj Finserv often provide the facility of loan foreclosure and part prepayment at affordable fees. Individuals can only apply for such facilities at nominal personal loan charges provided one month has lapsed since the disbursal of credits.

Bajaj Finserv also extends pre-approved offers which make availing such personal loans instantaneous and hassle-free. Pre-approved offers are available on numerous financial credits such as home loans, loans against property, business loans, professional loans, etc. You can check your pre-approved offer by providing your name and phone number.

Such myths often restrict individuals from availing personal loans. Nonetheless, choosing an appropriate financial institution and ensuring timely repayment can help individuals reap maximum benefits from personal loans.