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ESG
You may be fully aware of the loan EMI amount you are paying, but do you know the actual loan cost you are incurring?
Most people don’t even realise that they end up paying more than expected. We’ve broken down all the hidden charges of a personal loan, and what you can do to minimise or avoid them.
At IDFC FIRST Bank, we believe in full transparency — no fine print surprises. That’s why IDFC’s FIRSTmoney Personal Loan comes with zero foreclosure charges, 100% digital processing, and competitive interest rates starting at 9.99% p.a.
However, if you are opting for a personal loan from any other loan provider, read on to know all about the charges associated with personal loans.
The Real Cost of a Personal Loan Isn’t Just the EMI
Most borrowers evaluate personal loans based only on:
- EMI affordability
- Interest rate
- Tenure options
But the true cost of a personal loan includes multiple hidden or lesser-known charges that many banks or NBFCs may not disclose upfront to you or maybe hide them in the fine print.
1. Foreclosure or Prepayment Charges
What it is: A penalty for repaying your personal loan before completing the agreed upon tenure
Typical range: 2%–5% of the outstanding principal.
Why it matters: If for any reason you decide to close your loan early (after receiving a salary hike or a bonus) this charge can wipe out your expected interest savings.
At IDFC FIRST Bank, we charge zero foreclosure fees on FIRSTmoney Personal Loans — so you can repay anytime without the fear of penalty.
2. Processing Fees
What it is: A one-time fee deducted from your approved loan amount at the time of disbursal. In case you go for an additional loan, you will have to again pay a processing fee on the same.
Typical range: 1%–3% of the loan value.
Example: On a ₹5 lakh personal loan, a 2% fee means you get ₹10,000 less in your bank account. However, it is still included in the principal amount.
💡 Tip: Always check if the processing fee is flat or negotiable. Some lenders may offer lower fees for higher credit scores.
3. Documentation and Admin Charges
What it is: Charges for handling paperwork, verification, or courier costs are often buried under "miscellaneous".
Why it matters: Even a ₹999 admin charge adds up, especially when it’s not disclosed upfront or appears post-disbursal.
✅ FIRSTmoney personal loans are 100% digital that come with no courier or document handling charges.
4. Late Payment Penalties
What it is: Fees (and sometimes additional interest) for delayed EMI payments.
Typical range: ₹500–₹1000 per EMI + penal interest (2%–3% of the overdue EMI, charged extra per month).
What to watch out for: Lenders who calculate late interest daily, causing the amount to compound really fast.
5. Mandate Rejection / Bounce Charges
What it is: Charges applied if your auto-debit/EMI instruction fails due to low balance or bank error.
Typical Range: ₹300–₹500 per failed attempt.
Pro Tip: Even one bounce can negatively affect your credit score.
✅ IDFC FIRST Bank sends timely reminders to help you stay on track and maintain a clean credit record.
6. Interest Calculation Method
What it is: Some lenders use a flat-rate interest method instead of the reducing balance method— meaning you pay more over time.
Reducing balance = interest charged only on the outstanding amount.
Flat rate = interest charged on full loan amount throughout the tenure.
What’s the implication?
A 10% flat rate is equivalent to 17%–18% reducing balance rate!
✅ IDFC FIRST Bank uses transparent reducing balance method so you pay interest only on what you owe.
7. Lock-In Periods
What it is: Minimum number of EMIs before you’re allowed to prepay or foreclose the loan.
Typical lock-in: 6 to 12 months
Hidden catch: Even if you want to close early, you’re stuck paying for the minimum lock-in period.
✅ FIRSTmoney Personal Loan has no lock-in period, allowing you to repay whenever you want.
Summary: Personal Loan Hidden Charges Checklist
Charge Type |
Common in Traditional Personal Loans? |
IDFC FIRST Bank Personal Loan |
Foreclosure Fee |
✅ Yes (2–5%) |
❌ No |
Processing Fee |
✅ Yes (1–3%) |
✅ Yes (clearly disclosed) |
Admin/Documentation Fee |
✅ Often hidden |
❌ No |
Late Payment Penalties |
✅ Yes |
✅ Yes (disclosed upfront) |
Bounce Charges |
✅ Yes |
✅ Yes (reminders provided) |
Flat Rate Interest |
✅ Sometimes |
❌ No (reducing balance) |
Lock-in Period |
✅ Common |
❌ None |
Why Borrowers Choose FIRSTmoney Personal Loan
Our promise is simple: No hidden charges. No surprises. Just a smarter loan.
FIRSTmoney Personal Loan Benefits:
- 💰 Get loans up to ₹10 lakhs
- 📉 Interest starting at just 9.99% p.a.
- 📲 100% digital application & disbursal
- 🚫 No foreclosure or prepayment charges
- ⏱️ Quick eligibility check & approval
Apply Online in Minutes
It takes just a few clicks to check your eligibility and start your personal loan journey with IDFC FIRST Bank.
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.