A personal loan is a handy tool that provides individuals with the flexibility to meet their immediate financial needs. This could include planning a wedding, managing a medical emergency, or paying for higher education.
The amount you borrow has an interest obligation – you are expected to pay back the loan in equated monthly instalments (EMIs) that comprise both a principal and an interest component (charged at a pre-decided interest rate).
Apart from the rate of interest, there is usually a set of processing fees or charges that are applicable on your loan. Knowing about these in advance can help you make an informed decision and manage your finances effectively. Let’s take a look:
Common fees and charges applied on personal loan
Common fees and charges applied on personal loans may vary among lenders, but here are some typical ones to be aware of:
- Interest rate: The primary charge, expressed as an interest rate, represents the cost of borrowing the loan amount.
- Processing fee: A one-time fee charged by the lender for processing your loan application.
- Prepayment charges: Fees incurred if you repay the loan before the stipulated tenure. Some loans have a lock-in period during which prepayment is not allowed.
- Late payment fees: Penalties for missing the due date of your monthly instalment.
- Bounce charges: Charged when your EMI payment bounces due to insufficient funds in your account.
All about personal loan processing fees and charges
The processing fee is a non-refundable one-time charge that lenders impose when processing a personal loan application. It is typically expressed as a percentage of the loan amount. The processing fee is used for covering the expenses related to assessing the borrower's creditworthiness, verifying documents, conducting background checks, and processing the loan. Essentially, it compensates the lender for the administrative efforts involved in evaluating and disbursing the loan.
Additionally, being aware of other charges such as interest rates, prepayment charges, bounce charges, stamp duty, and more will help you to plan effectively and ensure timely loan repayments.
Processing fee for Bajaj Finance Personal Loan
Bajaj Finance Limited offers personal loans with competitive personal loan interest ratesand flexible repayment options. Our personal loans include a processing fee of up to 3.93% (inclusive of applicable taxes) of the loan amount. However, the exact percentage may vary based on several factors, including your creditworthiness, the loan amount, and the prevailing terms and conditions at the time of application.
It is essential to remember that the processing fee is different from the interest charged on the loan amount. The interest is a cost that you incur on the borrowed sum over the loan tenure, while the processing fee is a one-time charge payable at the time of your loan application.
Factors that influence the processing fees
The factors affecting the processing fees usually vary from one lender to lender. These could have an impact on the percentage charged as a processing fee. Here are some of the key factors that influence the processing fees on personal loans:
- Lender's policy:
Each financial institution has its policy regarding processing fees. Some lenders might offer promotional discounts during special offers to attract more borrowers. It’s ideal that you compare different lenders to find the best deal based on your requirements.
- Credit score:
Your credit score is a crucial factor considered by lenders when evaluating the risk associated with the loan. A higher credit score indicates responsible financial behaviour. Lenders may offer lower processing fees for borrowers with excellent credit scores as an incentive to attract low-risk customers.
- Loan tenure:
The loan tenure over which you will repay the loan, can influence the processing fee. Longer tenures may lead to higher processing fees due to the increased administrative work involved in managing the loan for an extended period.
Now that you know about the processing fees, it is important to read the agreement and the terms applicable on your loan. When you apply for a personal loan from Bajaj Finance, you get a detailed loan agreement with all applicable fees and charges mentioned clearly. You can also read the fees and charges on our website and app.
Make an informed decision and apply for a loan that suits you best.
