Do you want to send your kids abroad for higher education? Or are you in need of some funds for a medical emergency? If so, you’ve probably considered opting for a personal loan. After all, it is a convenient credit choice that does not require collateral and provides flexible repayment options.
However, loans often include additional charges that you might overlook at the time of application. And if you’re not careful, they can quickly add up into a bigger expense later.
What are the various hidden charges?
There are several hidden charges in personal loansthat you must be aware of. Below is a list of such charges.
- Late payment charges
Late EMI payments usually attract late payment fees in the form of hidden charges. These can be anywhere between 2-3% of your EMI amount and include a penal interest that is levied on the overdue amount along with the GST charges.
- Processing fee
As the name suggests, lenders charge a processing fee to process your loan application. The amount is usually a percentage of the borrowed loan amount and differs from lender to lender.
- Foreclosure charges
A foreclosure charge is a payment made by the borrower on pre-closing the personal loan. For example, if the loan tenure is 5 years, but you want to close the loan within 4 years, the lender may impose a foreclosure charge.
Now that you’re aware of the hidden charges which lenders levy, here’s how you can avoid them wisely.
Additional Read: What Is Considered as a Good Interest Rate for Personal loan?
1. Read the loan agreement carefully
When your loan gets approved, the lender gives you a loan agreement that lays down all the terms and conditions of the debt. This is an important document that should be given the most attention.
Along with the mode of repayment and the personal loan interest ratesyou’ve agreed upon, it will mention all the charges involved, including penalties that would be charged in case of default.
Since it is a detailed document, it can discourage you from reading it entirely. However, take the time to read the agreement meticulously before you sign the dotted line. This will ensure you don’t miss any important details and empower you to avoid any conflicts in the future.
2. Know the charges involved
From the get-go, you must know what charges might be included in your loan agreement. You should get in touch with the lender to understand these charges and why they are included in the agreement. Once you know about these charges, you can easily determine how much you have to pay using a personal loan EMI calculator. This also reduces your chances of paying any hidden costs.
Additional Read: Tips to Save Money Through Personal Loans
With a little effort and due diligence, you can easily avoid hidden charges and make your debt repayment a breezy affair. And if you’re looking for a quick loan, turn to Tata Capital. Our multi-purpose personal finance options let you meet a variety of personal needs.
We offer competitive personal loan interest rateswith flexible repayment modes and minimal paperwork.
To know more, contact us today!