1] Fees And Charges:
Lenders typically charge a processing fee on the loan, which varies with each lender. ICICI Bank for instance levies a fee of 3 per cent and applicable taxes, while Axis Bank charges anything from 0.5-2.5 per cent. Kotak Mahindra Bank charges around 3 per cent and additional Goods and Services Tax (GST). State Bank of India (SBI) charges a processing fee of 1 per cent of the loan amount, but minimum of Rs 1,000 and Goods and Services Tax (GST) and maximum of Rs 10,000 and GST. HDFC Bank charges a processing fee up to Rs 4,999 plus taxes.
Besides, the processing charges, bank could also levy other charges, such as stamp duty charges, equated monthly instalment (EMI) dishonour charges (should you miss your EMI on the due date), collection charges (if the bank has to pay you a visit to collect the EMI due after you have missed paying it despite a couple of reminders, and so on. Stamp duty charges are typically levied at the applicable rate, while the other charges are typically in the range of Rs 200-500 along with applicable taxes.
Some banks charge penalty for missing out on EMIs as an interest on the overdue instalment. For instance, Axis Bank charges a penal interest of 24 per cent per annum, i.e. 2 per cent per month on the overdue instalment.
SBI, for instance doesn’t charge any penal interest for loans up to Rs 25,000. But on amounts exceeding that, if the irregularity exceeds for a more than a month, the bank would charge a penal interest of 2 per cent per annum over and above the applicable rate of interest on the overdue amount for the period of the default.
There is also a loan cancellation charge should you decide to cancel your loan. This is typically charged after you have paid the first EMI and then decide that you do not want to carry on with the loan. ICICI Bank, for instance, charges a flat fee of Rs 3,000 plus taxes as loan cancellation charge.
Lastly, there would be the foreclosure charge should you decide to prepay your loan. This could be anywhere between 2-5 per cent along with GST on the outstanding principal.
So, as a rule of thumb, compare all these charges beforehand prior to applying for a loan.