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In today’s world, there is no such thing as a free lunch. You have to pay for products and services and typically higher the quality higher is its price. This is applicable for just about everything you use or need.

What if you were told that this is also applicable to your personal loans as well?

This is applicable to loan products where lenders such as Tata Capital charge fees for extending various types of loans.

Now, before you feel that this unfair and that these lenders should not be adding additional charges, you should know that these lenders also incur expenses when they extend personal loans to you. They make their money from the interest they charge you and in most cases, they are able to manage with the interest they earn.

You can see the kinds of personal loan charges that lenders levy on your personal loan from the list detailed below.

Interest rate:

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The biggest charge on you for your personal loan is the interest rate. The interest rate can vary from as low as 10% to as high as 25% depending on the lender. For instance, Tata Capital charges an interest varying from 11.49% to 19% depending on the credentials you present to the lender. If your credentials in regard to steady income, steady job, high credit score and excellent repayment history of your past and current loans are exemplary you can qualify for the lowest interest rate. In any case, you should use the personal loan EMI calculator available on the website to make your iterations and see how changing the parameters of your loan will impact the EMI.

Processing charges:

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Processing your application involves efforts to be put in by lenders and in committing these efforts they incur expenses on staff salary, computers, Internet charges, stationery costs and overheads. If you apply for a personal loan and do not avail the loan then they are well within their rights to recover the costs they incurred on processing your loan as personal loan charges. Thus, processing charges are a legitimate part of the loan application process. It can go up to 2% of the loan amount but can come down depending on your credentials such as your employment status, income level, and credit score and prompt repayment of other loans.

Prepayment charges: Sometimes, you come into some windfall amounts either in the form of bonus if you are a salaried employee or windfall profits on fulfilling a large unexpected order if you own a business. In such cases, you can think of making part payment of your principal loan amount. However, there are conditions attached to prepayment as well. This is because you upset the smooth functioning of the lender when too many of you begin making part payments. Thus, the lenders charge personal loan charges up to 2% of the amount you prepay as prepayment charges along with other conditions such as putting a limit on the amount of prepayment. This, again, is dependent on various factors including your relationship with the lender and you can negotiate and bring down the prepayment charges.

Fee for making late payments:

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If you don’t take care to make your personal loan EMI payments promptly you run the risk of incurring penalties which can cost you dearly. Typically, 2% charge is levied every outstanding month over the prevailing interest amount for delays in EMI payment.

Other charges: There are other personal loan charges that are applicable on various transgressions made by you in discharging the loan. For instance, if you have opted for cheque payment or ECS payment for the EMIs and the payment does not go through for insufficient funds you can incur a heavy penalty of Rs 450 per payment not going through. You must study these charges carefully to ensure you don’t violate any of the conditions of the loan. You must go through all the documented conditions and if you are not clear you must ask for them so that you know exactly what happens if you transgress any of the conditions.

From the foregoing, it is clear that while taking personal loans is quite easy and simple, repaying is an important aspect of the personal loan process. Beware that any slackness in meeting all the conditions of the loan can cost you heavily. So, it is in your interest to study all the conditions including personal loan charges and use the facilities made available to you such as the personal loan EMI calculator and other calculators to understand the various contours of the personal loan.