What are the Hidden Costs of Personal Loans?

A personal loan can be a quick credit help in an emergency or a cash crunch since no reasons to avail one. Almost every lender is now available online, and you can quickly access a personal loan anytime. While this can be an easily accessible credit help, it’s important to keep a watch on the hidden costs it brings in.

Check out the hidden costs of personal loans.

5 Hidden Costs of Personal Loans

1. Prepayment charges:

Prepayment is when you pay back your dues before the tenure of the loan ends. Paying prior causes will cover your liability quicker but not good for a lender because of the loss of interest. To cover this loss, often the lenders add a prepayment cost to the personal loan. Before you sign the loan deal, always ask for it with the lender and try negotiating.

2. Origination fees:

For providing you with a loan, a few lenders can charge you a fee, apart from the interest that is added to the total loan. Some forms of originating fees are- processing fees, fees for preparing documents and or for checking your credit score. In a mortgage or personal loan, this is very common.

3. Application fees:

Application fees are charged for applying for a loan. This is applied to cover the cost of the loan application and the efforts of the lender. Sometimes, this is charged to control unnecessary loan applications.

4. Late fees:

Late fees are an unavoidable hidden cost you pay on a personal loan or an EMI deposited over the due date. Taking a credit line from a lender like FlexSalary where a flexible repayment option is offered can help you avoid paying the late fees on your repayments.

5. Loan insurance:

Loan insurance is charged for closing the loan in case of death or permanent or uncurable disablement of the payee. You can choose to pay this for a secured future but always ask if it’s not hidden in the personal loan.

How to Stay Away from Hidden Costs of Personal Loans

As a salaried employee, going for a line of credit from FlexSalary is always a great alternative for credit instead of a personal loan. FlexSalary extends a credit line of up to Rs. 2,00,000 at a reasonable interest rate with zero hidden charges. Not just the interest rate is reasonable but being a credit line, interest is charged only on the funds that you borrow, and not on the total funds approved to you.

Following are the five reasons that make a Line of Credit from FlexSalary the best.

No hidden charges are taken, and only a one-time processing fee is charged.
Flexible payback options are provided. As there is no fixed EMI, payments are easier to manage.
It comes with a flexible tenure of 3-36 months during which you can pay off your dues anytime without any late payment charges.
No prepayment charges are taken on the FlexSalary credit line even after a one-time payment before the tenure is over. No additional interest is charged.
This is a perfect ready credit facility for any emergency or unprecedented expense.

The FlexSalary application process is easy and is 100% online. The documentation is very minimal, and online KYC is done for verification. Even with a salary of Rs. 8,000/ month, you are qualified to apply for a line of credit at FlexSalary. No collateral is needed as well, making it the perfect substitute for a personal loan.