Banks offer personal loans at competitive interest rates. Existing customers can enjoy additional discounts on personal loan interest. Opt for personal loan from your bank if possible.
Loan processing charges : Banks and NBFCs charge processing fees on personal loans. This is a non-refundable charge which you pay when applying for personal loans.
Most banks charge a processing fee of 1-2% on personal loan amount. Personal loans are short tenure loans, and processing fees are a sizeable amount. Compare processing charges on personal loans, before short listing the bank.
Documentation charges : These are charged for documentation charges on personal loan.
Part Prepayment charges : If you part pre-pay personal loans, there are part pre-payment charges. You would have to pay around 2% plus applicable taxes on part pre-payment amount. Some banks charge 1-5% on principal outstanding + GST.
Common charges on personal loan
- Payment dishonor charges
- Duplicate statement charges
- Cheque swapping charges
- Duplicate no dues certificate
- Duplicate amortization schedule charges
- Loan re-booking charges
- Loan cancellation charges
- Legal charges
- Stamp Duty
- CIBIL Report.
Amortization means repaying debt through fixed payment over a specified tenure. An amortization schedule is a detailed table of recurring loan payments which show the principal component and interest component in the personal loan EMIs. Personal Loan EMIs are of the same amount. Earlier installments comprise of higher interest and lesser principal. As each installment passes, proportion of interest in the EMI reduces and the principal portion increases.
Preparing Amortization Schedule
Prepare amortization schedule using basic loan information like loan tenure, personal loan interest, total number of periodic payments and personal loan monthly installments.
Let us consider a personal loan amount of Rs 6 Lakhs, rate of interest of 12% and tenure of 5 years. The Personal Loan EMIs work out to be Rs 13,347.
We now calculate the interest portion in first month’s EMI. You must multiply the loan amount with interest rate. You have to divide the interest rate by 12 to calculate the monthly interest.
This works out to be:
6,00,000 * 0.12 / 12 = Rs 6,000.
The principal component can be calculated by deducting the interest component from the monthly installment.
This is Rs 13,347 - Rs 6,000 = Rs 7,347. You then deduct principal amount you have paid in the first installment from the loan amount to get the fresh loan balance. You then repeat the calculations after considering the fresh loan amount. You then reiterate the steps till amortization schedule has been created.
||Installment Amount (Rs)