₹ 10 Lakh Personal Loan: Understanding Fees and Charges Before You Borrow

Taking a Personal Loan can be a smart financial decision when you need funds for major expenses such as a wedding, home renovation, education, or medical emergencies. However, before applying for a ₹ 10 Lakh Personal Loan, it is essential to understand the costs involved. Every loan comes with certain charges that affect the overall amount you repay, and being aware of these helps you make a well-informed borrowing decision.

This guide explains the different Personal Loan fees and charges that you should know before borrowing, ensuring transparency and practical financial planning.

Why Understanding Loan Charges Matters?

While the interest rate is the first thing most borrowers look at, it is not the only cost of borrowing. Several additional charges are applied during the loan tenure. These include processing fees, repayment bounce charges, foreclosure charges, late payment interest, and more. If ignored, these costs can increase your total repayment amount significantly.

Understanding these Personal Loan fees and charges helps you:

Compare loan offers effectively.
Plan your repayment better.
Avoid hidden costs and penalties.
Choose a lender that aligns with your financial capacity.

Key Fees and Charges on a ₹ 10 Lakh Personal Loan

Below are the typical charges you should consider when applying for a Personal Loan.

1. Processing Fee

The processing fee is a one-time charge deducted at the time of loan disbursal. It covers the cost of verifying your documents and processing your loan application.
For most lenders, this fee is up to 2% of the loan amount plus applicable taxes.

Example: If you take a ₹ 10 Lakh Personal Loan, and the processing fee is 2%, the cost will be ₹ 20,000 plus taxes. This amount is deducted from the sanctioned amount before disbursement.

2. Repayment Bounce Charges

If your EMI payment fails due to insufficient funds in your account or any technical issue, lenders apply a penalty known as a repayment bounce charge.
This charge is generally ₹ 350 plus applicable taxes per bounced EMI. Timely EMI payments can help you avoid this penalty and maintain a good credit score.

3. Late Payment Interest

If you miss your EMI due date, an additional 3% per month on the overdue amount is charged as late payment interest. This fee can accumulate quickly, making your loan costlier, so always ensure prompt EMI payments.

4. Part Prepayment Charges

Some borrowers choose to pay a portion of their loan before the end of the tenure to reduce their interest burden. However, lenders may apply part prepayment charges for doing so.

Typically, this charge can be up to 5% of the prepaid amount plus applicable taxes, and partial prepayment is allowed twice a year, usually up to 25% of the outstanding balance.

5. Foreclosure Charges

If you plan to close your loan early by paying the entire outstanding balance before the end of the tenure, a foreclosure charge is applicable. For Personal Loans, the foreclosure fee can be 5% of the principal outstanding plus applicable taxes.

Although prepaying can save you interest, it is wise to calculate whether the savings outweigh the foreclosure costs.

6. Repayment Swap Charges

Sometimes borrowers wish to change their mode of repayment, such as switching their bank account or updating their standing instructions. For such requests, lenders usually charge a nominal ₹ 500 plus applicable taxes per swap.

7. Duplicate NOC Charges

A No Objection Certificate (NOC) is issued by the lender after your loan is fully repaid. While the first few copies may be free, additional copies may attract a fee of ₹ 250 plus applicable taxes for each paper copy requested.

8. Legal or Recovery Charges

In case of non-payment or default, lenders may initiate legal action or recovery proceedings. The charges for such actions depend on actual expenses incurred and vary from case to case.

9. Annual Maintenance and Other Charges

Most lenders do not levy annual maintenance charges on Personal Loans. However, charges for statements of accounts, foreclosure letters, or other documentation may be applied. These are usually minimal and often free when accessed online.

How Fees and Charges Affect the Total Loan Cost?

Let’s take an example to understand how these charges can influence your borrowing cost.

If you apply for a ₹ 10 Lakh Personal Loan at 11%*p.a. interest rate for 5 Years*:

EMI: ₹ 21,742 approximately.
Total repayment: ₹ 13.04 Lakh.
Processing fee: ₹ 20,000 (2% of loan amount).
Foreclosure charge (if closed early): up to ₹ 50,000 (5% of principal outstanding).

By considering all these costs in advance, you can better plan your finances and avoid any surprises later.

Tips to Reduce the Impact of Loan Charges

1. Compare Offers Before Applying: Different lenders may have varying processing and foreclosure charges. Compare all costs before choosing a lender.
2. Maintain a High Credit Score: A good score improves eligibility and can help you negotiate lower interest rates.
3. Avoid Delays in EMI Payments: Timely payments prevent late fees and protect your credit history.
4. Plan for Prepayments Strategically: If you have surplus funds, calculate prepayment benefits versus the applicable fees.
5. Use a Personal Loan EMI Calculator: This tool helps estimate your total repayment cost, allowing you to make smarter borrowing decisions.

Why Transparency in Fees Matters?

Transparent disclosure of Personal Loan fees and charges ensures borrowers are fully aware of the financial commitment they are making. Reputable financial institutions clearly list all fees on their official websites, enabling borrowers to evaluate costs before applying. This clarity builds trust and helps borrowers plan responsibly.

Conclusion

Before taking a ₹ 10 Lakh Personal Loan, it is essential to look beyond the interest rate and understand all applicable fees and charges. These small costs, if overlooked, can significantly impact your overall repayment amount. By using online tools such as EMI calculators and carefully reviewing your loan terms, you can choose a plan that fits your budget and financial goals.

Financial institutions such as L&T Finance offer Personal Loans with transparent Personal Loan fees and charges, ensuring that borrowers can make informed decisions with complete clarity. Always read the terms carefully, calculate your EMIs, and plan your repayments wisely to enjoy a smooth and stress-free borrowing experience.