Personal Loan
Personal loans are unsecured loans available to meet your financial needs. Both salaried, as well as self-employed people can borrow this loan to help meet their personal expenses such as debt consolidation, wedding expenses, medical expenses, vacations etc. Practically these loans can be used for almost any type of expenses that are vital in nature. These loans are generally availed as quick unsecured loans as they can be availed without any strict documentation process and any need for loan security. The rate of interest charged on personal loans is higher as compared to secured loans. There are numerous lenders that provide Personal Loan Offers at competitive prices and that too, instantly.
Features and Benefits of Taking Personal Loans
No need for collateral: Personal loan is an unsecured loan and can be availed without keeping any assets which you possess such as house or car as collateral. These loans are offered based on the applicant’s credit score, income details such as the source of income and expenses, age, etc.
Flexible Tenure to repay: There is a flexibility of tenure in personal loans of up to 5 years to settle the loan amount unlike credit cards or other means of finances where we need to make timely monthly payments.
Multipurpose use: Unlike other funding options, personal loans can be used for any purpose without any preconditions. It can be used to pay any previous debts and can prove to be handy in case of sudden financial constraints such as a medical emergency
Easy Documentation Process: To avail personal loans, there is no need to provide heavy documentation as it requires minimum documentation and gets frequently approved within 48 hours of submitting the form.
Take as much as you want: based on basic KYC, CIBIL score and income proofs, quick background checks, banks offer personal loan from Rs. 10,000 to Rs. 40 lacs, depending on the nature of the requirement.
Fees & Charges Involved:
We often come across various hidden charges by personal loan lenders such as processing fee, cheque bounce charges, pre-payment fees, and many others. Actually, these charges are not hidden and are clearly mentioned in the terms and conditions section of the loan document. In reality, the applicants or borrowers do not pay attention to what is written in the documents and are unaware of these charges. They later blame the lenders for not disclosing these charges. Let us understand what other charges are levied upon the personal loans apart from the interest rate. Along with the rate of interest, banks charge the following two types of fees on personal loans.
Processing fee: The processing fee on personal loans can range between 2 – 3% of the total loan amount and is sometimes negotiable if you have good terms with the lender. Banks also provide personal loan offers on some occasions for their valued customers where they can get exclusive loan schemes such as nil processing fees. Many banks charge processing fees of either Rs. 999 or 2% of the total loan amount, whichever is high. As these loans are taken for a short duration of time, higher processing fees can lead to considerably high cost on loan amount. Hence, it is important to evaluate and compare the All Inclusive Rates (AIRs) for personal loans and shortlist the best deal with zero or minimal processing fee.
Pre-closure fee: This fee is levied when you make a decision to close your loan before the specified loan tenure. Banks inflicts a penalty fee to recover the losses incurred due to the premature closing of a fixed interest rate loan. Prepayment penalty depends from bank to bank but it can range up to 5% of the loan amount. The terms and conditions of a loan document should be read carefully before availing it to check on the prepayment clauses. Pre-closure fees are also negotiable and banks are not very strict on this procedure of foreclosing the loan if discussed by the borrower.
There is a lot of uncertainty about this processing fee levied by banks on personal loans among the masses. However, there are certain banks that offer personal loans with zero processing fees. Here is the list of some top most banks that offer zero fees personal loans
- State Bank of India – Clean Overdraft
- Allahabad Bank – Loan for Pensioners
- Bank of India – Star Mitra
- Indian Overseas Bank – No fees for a loan up to Rs. 25,000
- UCO Bank – For Pensioners
- Punjab National Bank – For Pensioners
- Vijaya Bank – Vswashakti (Only for Women)
Apart from these banks, there are various other banks that offer personal loans at minimal processing fees. Canara Bank Personal Loans come with 0.50% processing fees. The processing fees of ICICI bank personal loans start from 0.99% and can reach Up to 2.25% depending on the credit history of the borrower. Citibank, Syndicate Bank and Union Bank of India also levy less processing fees on personal loans.
The Reason why Processing Fee is Charged by Lenders
A lot of time and effort and money go into processing a loan application that includes verifying loan application, check listing multiple documents, verifying personal information such as credit history, DOB, loan tenure, the purpose of loan etc. These operations cost is recovered from the borrower in the form of processing fees. The amount of processing fees depends on the amount of loan applied for. If the loan amount is high, the processing fees will certainly be high.
Conclusion:
When a borrower seeks for a high loan amount, it is quite obvious that the processing will also be high. So, in that case, it is sensible to look for those lenders that charge zero processing fees. The total cost of the loan including interest rate and processing fee should be calculated while evaluating the lender. Processing fee should not be the sole consideration while applying for personal loans. There are several other charges such as prepayment charge, cheque bounce charges and partial closure charges that should not be overlooked.
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