But, this sunny picture comes with a shadow as well. What most people and banks fail to mention are the charges and fees involved in getting a Personal Loan. In this article we will cover all such charges and fees, apart from the interest you’re likely to pay on your Personal Loan.

Processing Charges

While processing a loan, banks bear administrative costs. This amount is quite small in comparison and often varies between 0.5% and 2.50%. The processing charges for personal loan will vary from bank to bank. However, the individual applying for a personal loan can choose from:

(I) paying the processing fee straight away

(II) having the processing fee deducted from the actual loan amount at the time of disbursement.

Verification Charges

A bank needs to be certain of the loan repayment capacity of an individual before they actually disburse the loan. For this purpose, the bank usually hires an agency (third party) to verify the individual’s credentials. These agents check the credit scores and credit repayment patterns of the individual who has applied for the loan.

This extra cost incurred by the bank for the purpose of verification is known as the verification charge. This charge is borne by the applicant as it is an additional cost for the bank.

Penalty on late payment of EMIs a.k.a Defaulting

When an individual takes a Personal Loan, he/she is required to repay the loan amount in the form of EMIs. It is a moral responsibility on the borrower’s part to make sure that the EMIs are paid on time and in full because defaulting on an EMI attracts a penalty.

Penalty on Prepayment or Foreclosure of Personal Loan

Foreclosure of a loan implies the repayment of the loan before the stipulated tenure. Paying off the debt before time causes the bank to incur a loss. Therefore, in order to make up for that loss, banks charge a penalty for the prepayment. This penalty is usually charged at the rate of 2% to 4% and varies from bank to bank.

Fees for duplicate statement

Banks generally charge a fee for generating a duplicate statement of the schedule of payment and outstanding balance of the loan in case you lose/misplace your original copy. This fee generally ranges between Rs.200 and Rs.500.

Goods and Service Tax

For any additional service that is required by the applicant during the sanction of a loan or during the period of repayment, a small fee has to be borne by the applicant against the service in the form of Goods and Services Tax or GST.

Learn more about your Personal Loan Eligibility here.


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

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