Personal loans are popular because they offer quick approval, minimum paperwork and complete flexibility in usage.
But many borrowers focus only on the main interest rate and ignore the hidden charges that come with the loan.
These additional charges can increase your total loan cost without you even realising it.
Understanding these hidden charges helps you compare lenders better and avoid paying more than necessary.
This guide explains every important fee that may apply when you take a personal loan, so you can make an informed decision.
Hidden charges may not be visible in advertisements or promotional messages.
But once your loan is approved, these charges get added to your cost.
If you are not aware of them, you may end up paying a higher EMI or face extra deductions.
Knowing these charges helps you
The processing fee is one of the first charges you pay when taking a personal loan.
It is deducted from your loan amount or collected upfront.
This fee covers the lender’s cost of evaluating your profile.
It may vary based on
Always ask the bank if this fee is negotiable or if festive offers reduce it.
Some lenders charge extra for document handling, verification and agreement preparation.
These documentation charges are often clubbed under administrative fees.
They may include
These charges are usually small but must be checked before signing the loan agreement.
If you want to repay your loan before the end of the tenure, you may have to pay a prepayment fee.
This fee is charged when you pay a part of the loan early.
Prepayment reduces your interest cost, so lenders charge a fee to compensate for the loss.
The amount depends on whether your loan has a fixed or floating interest structure.
Before taking a loan, check
Foreclosure means repaying the entire loan early in one go.
While it helps you close your loan quickly, lenders may add foreclosure charges.
These charges depend on
Some digital lenders allow foreclosure without extra charges, while others impose a fee.
Always confirm the foreclosure rules.
If you miss your EMI, the lender charges penal interest.
This is higher than your regular interest rate and is charged for each day of delay.
Reasons for EMI delay may include
Penal interest can increase your loan burden.
Timely EMI payment helps avoid this charge and also protects your credit score.
Apart from penal interest, lenders may charge a late payment fee.
This is a fixed penalty that applies on top of the extra interest.
You may face this fee if
Check this fee beforehand because some lenders impose heavy late payment penalties.
If you change your mind and decide to cancel your loan after approval, cancellation charges may apply.
Some lenders refund the processing fee while others do not.
Loan cancellation rules differ for
Knowing this helps you take better decisions in emergencies.
Many lenders charge a small fee if you request a physical loan statement or repayment schedule.
Digital statements are usually free, but printed copies may have a charge.
This charge applies when
Digital statements help avoid these extra costs.
If you misplace your loan closure documents, lenders may charge for issuing a duplicate No Objection Certificate or agreement copy.
This fee is small but still a hidden cost that most borrowers do not think about.
When your EMI instruction is not registered or gets rejected by your bank, mandate rejection charges apply.
This may happen due to
Always check that your EMI auto debit is active.
Some lenders apply a convenience fee if you pay EMIs or charges using
This fee is usually small but may add up if you pay online every month.
Stamp duty is a government charge on loan documentation.
It varies across states and is usually included in the processing fee or administrative fee.
Borrowers often overlook this charge because it depends on local rules.
Some lenders charge a verification fee for
This is more common for offline loans and high risk applicants.
New age loan apps may add extra platform charges.
These may include
Always read the breakup before choosing a digital lender.
Some lenders offer or sometimes include insurance plans with personal loans.
These plans cover loan repayment in case of
While useful, insurance adds an extra premium, which increases your loan cost.
The best way to avoid hidden charges is to read the loan agreement carefully.
Follow these tips
Proper research helps you avoid unnecessary costs and reduces your overall loan burden.
Personal loans are simple, but hidden charges can increase your total repayment amount significantly.
Before applying, understand every fee clearly and confirm whether it is mandatory or optional.
A little awareness can save you a lot of money and help you choose the right lender.
Always compare offers and check terms carefully before finalising your loan.