Personal loans are economic tools used by people to get financial assistance from financial institutions (mainly banks and non-banking financial companies) in the situations of adversities as well as pleasant times. Personal loans have evidenced a substantial increase in demand. Generally, personal loans are known for their approachability and accessibility. These are disbursed within a few days of application verification. A personal loan can be availed by anyone and at any point in time without any hassle. The application process is straightforward and easily understandable. Few basic documents are required with a personal loan application. With relatively low personal loan interest rates, a personal loan has a feasible cost.
The principal amount of the personal loan and the personal loan interest forms a major part of the cost. The principal amount along with the interest is paid back in the form of Equated Monthly Installments (EMI). the personal loan interest rate varies with the credit score. A good credit score means that the personal loan interest rate will be lower than usual. Ideally, the credit score should be 750 and above. The emphasis is on the major part of the cost, and the minor costs that are very nominal get neglected.
SBI personal loan policy is available for anyone who has a minimum credit score of 650 and above. The personal loan interest rate on SBI personal loan starts from 10.50% per annum.
Some charges that are related to personal are as follows:
- Processing fees-
When a loan application is submitted with the lender along with the documents, the lender processes the application thoroughly to determine if an individual is eligible to get a loan or not. This process requires a lender to use its manpower and expend a lot of time. The lender charges a processing fee to cover these administration charges. SBI personal loan policy has a processing fee of 0.50% (excluding Goods and Services Tax) of the loan amount.
- Verification fee-
Some lenders also charge a fee for verification of the documents of the individual. To be on the safer side, some lenders get the verification done by a third party or external agency. These charges are borne by the lender initially ut recovered from the applicant.
- Late payment fee-
Banks and NOn-banking Financial Companies charge a fee if the individual does not make the payment on the specified date and time.
- Foreclosure fee-
If the individual has a surplus, the entire loan amount can be paid immediately before the stipulated time and irrespective of the loan tenure. This is known a foreclosure of a loan. The lender charges a fee for covering up for interest revenue lost.
These are the charges to be taken into consideration along with the loan amount and the personal loan interest rate, before applying for a personal loan. These charges may be nominal but can have a huge impact on the cost an individual has to pay for a personal loan.