HDFC Bank has revised the fees and charges structure on unsecured loans like personal loans. This will be effective from April 24, 2023 according to the HDFC bank website. It has also sent messages to its customers regarding this revision. Let us read on to understand the important revisions in charges, fees, and structure of HDFC personal loans.
Prepayment Charges or Premature Closure Charges
If you prepay your loan before the actual finishing date, the bank will incur a loss. To compensate for this, the bank may impose a prepayment penalty. Usually, it is around 2 to 4%. Similarly HDFC Bank also imposes a penalty for prepayment or a premature closure. Let us now see the revisions in the charges pertaining to prepayment or premature closure.
| Prepayment Charge (For full payment) | Premature Closure Charges (For full payment) |
| Term loan | Term loan |
| 0 to 12 months – Not allowed | Up to 24 EMI repayments – 4% of principal outstanding |
| 4% of principal outstanding for 13 to 24 months | After 24 EMIs and up to 36 EMI repayments – 3% of principal outstanding |
| 25 to 36 months – 3% of principal outstanding | 2% of principal outstanding post 36 EMI repayments |
| >36 months – 2% of principal outstanding | Premature closure charges would be applicable on the loan’s principal outstanding amount. GST and other government taxes and levies as applicable occasionally would be charged in addition. |
| GST and other government taxes and levies as applicable occasionally would be charged in addition. |
Part Prepayment (For partial payment)/Premature Closure Charges
Part prepayment is an effective way to reduce interest. The part prepayment amount is deducted from the outstanding principal amount. This will minimize the interest outgo. The savings you make is based on the timing and the amount of part prepayment.
| Part Prepayment Charges (For part payment) | Premature closure charges (For part payment) |
| Term loan | Term loan |
| 0 to 12 months – Not allowed | Premature closure charges for part payment are applicable on the part payment amount. It can be upto 25% of the principal outstanding and it is allowed only once in the financial year, twice during the loan tenure. |
| 4% of part payment amount in 13 to 24 months | Partial premature payment is allowed only after the first EMI is paid |
| 25 to 36 months – 3% of part payment amount | After the first EMI and upto 24 EMI repayments – 4% of the part payment amount |
| >36 months – 2% of the part payment amount | After 24 EMIs and upto 36 EMI repayments – 3% of the part payment amount |
| After 36 EMI repayment – 2% of part payment amount | |
| Part payment allowed after 12 EMIs. It is up to 25% of principal outstandingIt is allowed only one time in the financial year and twice during the period of the loan | GST and other government taxes and levies as applicable occasionally would be charged in addition. |
| GST and other government taxes and levies as applicable occasionally would be charged in addition. |
What Is A Personal Loan?
A personal loan is an unsecured loan that is a reliable source of funding when you are short of cash. You don’t have to borrow from your relatives and friends. Banks and NBFCs now offer personal loans without any collateral and minimal documentation. There is no end usage restriction also. They can be used for weddings, travel, education, home renovation, medical emergencies, etc. The bank will levy certain fees and charges on this loan since it is unsecured.
How Does A Personal Loan Work?
Post applying for a loan, the bank verifies your creditworthiness. It then gives a loan offer to you. The money is disbursed to your bank account. You can then use it for any purpose as desired.
What are the charges related to personal loans?
There are 6 personal loan charges you should know about.
- Loan processing charge: The bank will have to pay administrative expenses to approve and process the loan application. So, it will charge you a loan processing fee. This loan processing fee is very minimal and varies across banks. it is usually around 0.5% to 2.50% of the total loan amount.
- Verification Charges: The bank has a very strict verification process for sanctioning your loan. They will usually verify your credentials through third-party organizations and will have to pay them. The bank does this to ensure that you have the capacity to repay the loan. They verify your credit score and loan payback history. This cost for checking your credentials is incurred by the borrower and the bank calls them verification charges.
- Penalty on EMI Defaults: You can repay your loan through equated monthly installments or EMIs. If you miss an EMI, you will have to pay a penalty. So, ensure to choose an EMI that you can afford. In this way, you can avoid late payment penalties.
- Duplicate Statement Fees: If you need a duplicate statement of your payment schedule or if you don’t know the outstanding loan amount at any point in time, you can get these details from your bank by making a nominal fee payment.
- GST: Sometimes, additional services may be required during the loan approval or
disbursal period. For this, the cardholder should pay the GST.
- Prepayment or Foreclosure Charges: Sometimes, you will end up paying the loan completely before the loan tenure ends. In this case, the bank will levy prepayment or foreclosure charges to compensate for the loss to the bank due to the prepayment of your loan. This charge varies across banks and usually falls between 2 to 4%.
Interest Rates on Personal Loans
Interest rates may vary depending on factors including tenure, income, occupation, credit score, and others. The rates are not varying and are fixed.
What Is Reducing Personal Loan Interest Rate?
The interest rate on the outstanding balance is determined by using the reducing personal loan interest rate method. The interest owed on the entire loan amount is included in this case.