List Of Lesser-Known Loan Charges You Must Be Aware Of

Be it a car loan, a home loan, or a personal loan, most of us need some type of loan at some point in our financial lives, right? That is exactly why we should also be aware of the associated charges that are levied before and after we take the loan.

While the specific charges can vary depending on the type of loan and the lender, here are some less commonly known charges associated with loans in India:

Lesser-Known Loan Charges

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Processing Fee

This fee is charged by the lender for processing your loan application. It is usually a percentage of the loan amount.

Prepayment Charges:

Some lenders may charge a fee if you decide to repay the loan before the scheduled tenure. However, prepayment charges have been abolished for floating-rate loans by the Reserve Bank of India (RBI) but are still on fixed rate loans by some lenders.

Late Payment Fees:

If you fail to make your EMI payments on time, lenders can impose late payment charges.

Legal And Stamp Duty Charges:

These charges are related to the legal aspects of the loan agreement and the stamp duty for the same. They might not be prominently mentioned, but they can add to the overall cost.

Insurance Premiums:

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While it's common knowledge that you might need to take out insurance for a loan, the specific details of the insurance premium and coverage may not be widely known.

Credit Score Check Fee:

Lenders often check your credit score before approving a loan. While this is a standard practice, some lenders might pass on the credit check fee to the borrower.

Documentation Charges:

Lenders may charge fees for the documentation involved in processing the loan.

Conversion Charges:

If you decide to switch from a fixed interest rate to a floating rate, or vice versa, lenders may charge a conversion fee.

Loan Cancellation Charges:

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If you cancel your loan application after processing has begun, there could be charges associated with it.

It's important to carefully read the terms and conditions of the loan agreement and clarify any doubts with the lender to understand the complete cost structure associated with the loan. Keep in mind that regulations and practices can change, so it's always a good idea to check with the lender for the latest information.

Also Read: How To Manage Loan EMIs After Losing Your Job

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