Total cost of borrowing a sizable sum of money rises dramatically due to the many hidden charges.
Even before your loan is granted, some banks charge a fee when you apply for a loan. This cost often falls between Rs 2,500 and Rs 6,500.
Given that banks are currently offering house loans with annual interest rates as low as 6.65%, this may be the ideal time to buy a property using housing financing. However, choosing the bank that gives the lowest interest rates on house loans would be naive on the side of the borrower. An intelligent borrower should make sure he is not caught off guard by the banks on this front because the total cost of borrowing a sizable sum of money rises dramatically due to the many hidden charges.
The borrower should make sure that his budget accounts for these extra fees and hidden charges because banks may charge the borrower some of these fees, as and when applicable, at any time during the loan’s term. It’s possible that while one bank offers the same service, the other bank charges a fee in the name of doing so. That’s why before taking any loan, one should examine the interest rates, processing costs and other expenses charged by the banks. So, here are some of the hidden fees that you might not be knowing and can help you in many ways.
Login fee
According to bankbazaar.com, it is often known as an administrative fee or an application fee. Even before your loan is granted, some banks charge a fee when you apply for a loan. This cost often falls between Rs 2,500 and Rs 6,500. When your loan is accepted, this sum is subtracted from your processing charge. If the loan is not accepted, the login fee is not refundable.
Prepayment charge
Both preclosure charge and foreclosure charge are other names for it. If you fully prepay your house loan before the end of the term, this fee is due. It ranges from 2 per cent to 6 per cent of the outstanding balance.
Conversion charges
This applies whether you change a fixed-rate package into a floating-rate package or a floating-rate package into a fixed-rate package. It typically ranges from 0.25 to 3 per cent of the loan principal amount.
Recoveries charges
When the borrower fails to pay the EMI, his account defaults, and the bank is forced to take legal action against him, and that’s when this fee is taken into account. The customer is charged back for the money used in this process.
Legal fee
Banks hire legal professionals to handle these demands, whether it is the appraisal of real estate or the document verification process. They receive payment for their labour in exchange. Banks also charge legal fees for home loans because of this.
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