4 personal loan charges you should know before applying

Personal loans provide applicants with quick availability of funds to meet expenses such as medical emergencies, education, home renovation, etc. Still, these loans come with several charges, processing fees, and associated complications that borrowers must clearly understand before applying for any specific personal loan product to avoid surprises later on.

Furthermore, understanding these fees helps in more efficient management of personal loan costs and repayment plans. Now, before going ahead, let us also first look at the current personal loan interest rates as applicable currently. They are briefly discussed below:

Personal loan interest rates October 2025

Source: Bank websites

Note: The interest rates and processing charges mentioned above are illustrative in nature and subject to change as per each bank’s internal policies and applicant profile. Readers are advised to verify details on the respective bank's website before applying.

Personal loan charges that you must be aware of

I. Loan processing fees

• Lenders charge a processing fee to cover administrative expenses; this typically ranges between 0.5% and 3.93% of the loan amount.
• This fee may be deducted upfront from the loan disbursal or paid separately.
• It is generally non-refundable, even if the loan is not ultimately sanctioned.

II. Prepayment or foreclosure charges

• Some lenders impose a penalty if the loan is prepaid or foreclosed before the agreed tenure to compensate for lost interest income.
• Prepayment or foreclosure charges generally range from 2% to 5% of the outstanding principal, although some banking institutions offer zero foreclosure charges on personal loans, depending on other terms and conditions.
• Furthermore, partial prepayments may have limitations on frequency and amount, depending entirely on the lender's policy.

III. Late payment penalties and charges

• Delayed EMI payments can attract penalty charges in the form of late fees. These fees generally range between 1 to 2% of the overdue EMI amount.
• The applicable interest rates on overdue amounts can increase sharply if not managed properly. Such an increase can add to the overall repayment costs and build more pressure on the borrower.
• Consistent delays can adversely influence credit scores. It can also have legal consequences and cripple the future borrowing potential of a borrower.

IV. Other applicable charges to take note of

• Statutory charges, stamp duty expenses are applicable as per state laws. They depend on the banking institution lending you funds, and any such charges are deducted upfront at the time of loan sanction. Discuss this with your respective bank's customer support executive before applying for a new personal loan.
• If the EMI payments are missed due to insufficiency of balance in your bank account, then you will be liable for paying ‘bounce charges’. These charges are generally capped between ₹500 to ₹1,200, depending on the total loan amount.
• Administrative charges, document issuance expenses, and associated services also carry nominal fees. These fees are outlined in the detailed Key Fact Statement included in your loan brochure. You should review this before submitting your personal loan application for final approval.

Having a clear understanding of these charges can help aspiring borrowers plan repayments properly. It can also help them avoid hidden costs, future surprises, and any possibility of defaults. All these factors are critical to helping a borrower maintain a clean credit profile and a solid credit score, preferably a score of more than 750.

For all personal finance updates, visit here.

Disclaimer: Mint has a partnership with fintech companies to offer credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article aims to educate readers and raise awareness about the essential needs for credit, including loans, credit cards, and credit scores. Mint does not promote or encourage taking credit, as it comes with risks such as high interest rates and hidden charges. We advise investors to discuss with certified experts before taking any credit.