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Hidden Charges in Business Loans

One of the most common questions a Customer raises is that ” Please let me know of any hidden charges after taking a loan” However there is nothing like a hidden charge. All charges will be explained clearly to customer before accepting the proposal. But at times, some sales guys tend to not do this fearing losing a customer lest they do not know that they will not only lose all future business from the customer but also lose out on referrals from that customer.

Please find all charges that will be levied in case of a business loan

  1. Interest- Varies from 13% to 32% on reducing basis
  2. Processing Fees- 1 to 2.5 % of the loan amount which will be deducted from the disbursement amount.
  3. Insurance- Not Mandatory but certain lenders insist on it. Normally 1-2% of the loan amount which will be deducted from disbursement amount
  4. GST on Insurance & processing fees – 18% of Insurance & PF Collected
  5. Franking Charges- Around 500-1000 Rupees
  6. Gap Interest- Interest that will be deducted from the disbursement amount that accounts to the Interest charges levied for No. of days before the actual full EMI starts

Different banks charge a prepayment penalty for pre-closure. Most banks insist on a minimum 6 months of EMI Repayment before one can opt for pre-closure. Post which charges ranging from 2-6% can be levied on the outstanding principal amount.

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