If you are planning to take out a business loan, then you should be aware of some important charges that financial institutions charge. Business loans include many charges. Some charges like processing fee, interest rate, document processing fee, EMI bounce fee, prepayment fee, no objection certificate fee, foreclosure fee, loan cancellation fee, post-dated cheque charges and many more. So before applying for a business loan to any financial institutions, you should be aware of all the charges. Now let’s briefly understand the fees and charges of business loans.
List of Some Important Charges
- Processing Fees
- Interest Rate
- Equated Monthly Installment (EMIs) Bounce Charges
- Post Dated Cheque Charges
- Late Payment Charges
- Loan Cancellation Fee
- Prepayment Fees
Basically the processing fee is the amount which is charged on your loan application for the loan process. The processing fees include the cost of checking your business or personal cibil score, checking for loan approval and administrative charges. So the lender will deduct this processing fees from your loan disburse loan amount before the loan credited into a borrower’s account. So different financial institutions charged different processing fees.
In simple language, the interest rate is the cost paid by the borrower during the loan tenure. Interest rates are expressed as a percentage of the principal per period. It is calculated on a monthly basis and annual basis is known as Annual Percentage Rate (APR).
Equated Monthly Instalment (EMI) Bounce Charges
Always keep in mind that you should pay your EMI on time. If you are not paying EMI on time then you will have to pay higher fees as per the norms of financial and non-financial institutions. Even EMI bounce negatively affects your CIBIL score and fines have to be paid. Basically this EMI bounce is due to insufficient balance in your account or due to mismatch of signature.
Online Convenience Fee
If you want to access your business loan account online then you have to pay some fee to avail the facility. It can be operated by user ID and password which is given by the lender at the time of loan approval. However now some financial institutions have started their own app to check the status of the business loan and it is free so you can save charges by using the apps.
Foreclosure / Prepayment Charges
Business loan foreclosure means that you will have to pay the entire outstanding loan amount in one payment instead of paying the loan’s monthly EMI. If you close your loan before the tenure period they will impose some penalty. Hence the foreclosure fee depends on the loan amount. But nowadays some financial institutions are paying NIL prepayment charges. Let’s understand with the help of an example –
Suppose you need funds to grow your business so you have taken a business loan. With the help of business loans, your business reaches a high level and your business will be profit-making. In that situation, you have enough cash to repay the loan amount before the tenure period.
Documents Processing Charges
This is the fee charged by the lender for the paperwork of the business loan application. The document fee handles the charges for the services of the employee. So this fee will vary on your loan amount.
Late Payment Charges
A late payment fee is charged by the lender when the borrower fails to pay the loan EMI on its due date. To avoid this you can avail auto-debit facility so that the amount will be automatically deducted from your bank account on the due date. If you have availed the auto-debit facility, then you have sufficient balance in your account to pay EMI amount. You can save charges with the Auto Debit facility.
So these are some basic fees/charges that can be taken by the financial institution at the time of loan processing. With a good cibil score you can apply for an unsecured business loan from Wishfin.