Loan Charges Beyond the Interest Rate
When comparing loans, most people look at the interest rate — but the total cost of a loan includes several other charges that are easy to miss in the fine print.
Processing Fee
Charged upfront when your loan is sanctioned — typically 0.5% to 3% of the loan amount. On a ₹5 lakh loan at 2%, that is ₹10,000 before you receive a single rupee.
GST on Processing Fee
18% GST is levied on the processing fee. This is non-negotiable and non-refundable.
Prepayment / Foreclosure Penalty
If you repay your loan early, many lenders charge 2%–5% of the outstanding principal. On a floating-rate loan from a bank, RBI mandates no prepayment penalty — but NBFCs and cooperative lenders are exempt from this rule.
Late Payment Penalty
Missing an EMI typically attracts a penalty of 1%–3% per month on the overdue amount, plus it dents your CIBIL score.
Insurance Premium
Some lenders bundle loan insurance into the EMI. It protects your family if you pass away during the loan tenure — but verify if it is optional and if the premium is reasonable.
How to Protect Yourself
- Always ask for the Loan Agreement and read all fee clauses
- Request a written breakdown of all charges before signing
- Compare the APR (Annual Percentage Rate), not just the interest rate
- Negotiate — processing fees are often waivable for good credit profiles
At Al-Khair, all charges are disclosed upfront. No surprises, no hidden costs.