Very often we fail to read the fine print in a loan document. If you intend to make comparisons with other types of loans, it is necessary to take into account these charges to arrive at the real cost. For example, the processing fee and prepayment fee is lesser in the case of a loan against property than that of personal loan.
Here is a list of all charges that are levied either before the loan is disbursed or through the course of the loan or when you terminate the loan:
Description of Charges:
- Processing fee
- Prepayment fee
- Charges for changing from fixed to floating rate of interest
- Charges for changing from floating to fixed rate of interest
Processing fee:
Processing fee is the amount charged by banks to cover the cost of processing your loan application. Processing fees vary from one bank to another. Some banks ask you to pay the processing fee upfront even before the loan is sanctioned. This is often charged when you submit your loan application along with the supporting documents.
The processing fee is generally a percentage of the loan amount and is between 0.25-2 per cent for loan against property.
Prepayment fee:
The pre-payment fee is the penalty paid by the borrower for foreclosing the loan before the actual tenure. Pre-payment fees are levied as a percentage of the outstanding principal of the loan amount. The prepayment fee varies from bank to bank. It varies from 1-4 per cent of the outstanding loan amount, if the repayment amount exceeds 25 per cent of the outstanding loan amount.
There are a few banks that allow you prepay the loan if you have funds without charging you any penalty on it. Ideally one should opt for a lender that does not charge a prepayment penalty.
Charges for changing from fixed to floating rate of interest:
This is charge wherein you are charged for switching your interest rate from fixed to floating rate of interest. It is levied as a percentage of the outstanding principal of the loan amount. The charge varies from 0.25-2 per cent.
Charges for changing from floating to fixed rate of interest:
This is charge wherein you are charged for switching your interest rate from floating to fixed rate of interest. It is levied as a percentage of the outstanding principal of the loan amount. The charge varies from 1-2 per cent.
There are banks that also have others charges such as charges for late payment of EMI, duplicate no due certificate / NOC, cheque swapping charges, bounce cheque charges, statement charges (per statement), duplicate repayment schedule charges.
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