There are many costs involved with business loans. A few basic charges include interest rate, processing fees, EMI bouncing charges, online account access charges, etc. Before applying for business loans, it is always a good idea to acquire information on all these costs in order to facilitate proper funds and working capital management.
Business loans help in providing additional funds for all business requirements. But it is important to keep a tab on how much the businessman would be spending to get the loan and also about the loan repayment period. This will help in making a sound decision and grabbing the best loan deal for the business.
So, when you plan to avail business loans for your business, whether to increase working capital or for more investment in the business, it is important to ensure to read about all the fees and charges associated with the loan. This will ensure that you manage expenses in a better way. Let’s take a look at the fees and charges related to loans:
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The processing fee is charged on the loan amount. This fee is charged to cover some cost involved in the processing the loan application. In addition, it also involves cost involved in checking CIBIL score, administrative costs, and approval of the loan. Generally, this cost is pre-deducted from the loan amount, i.e. the lender deducts this amount from the sanctioned amount before crediting the loan amount to the business owner’s bank account.
The interest rate is the cost of borrowing and it is charged by the lender. It is charged annually and is calculated on the loan amount. Interest rate and loan amount together make the EMI. In simple words, interest cost is paid during the loan tenure.
EMI Bounce Fees
There is some penalty charged for missing an EMI. This is the late payment fee and is levied by the lender. Significantly, EMI bounce instances put a negative impact on the CIBIL score.
Penal Interest on late payment
There is also an interest charged on late payment of EMI or when you default on repayment as well. This is also charged by the lender.
Online Convenience Fee
There is also some fee that is charged for online access to the loan account. This is the convenience fee of acquiring details on loan account online. The lender provides a unique ID and password that you use. However, there are several business loans providers in India that offer their mobile apps for the convenience of the borrowers. And they charge absolutely no cost for it.
Uncertainty is the basic nature of the business. You may avail business loans when you don’t have enough cash. And after availing business, you might get enough cash to repay the loan before its tenure. So in situations where the businessman wants to foreclose loan account, a penalty is charged on it which is called foreclosure and prepayment charges. However, there are several NBFCs that do not charge any penalty on foreclosing the loan account.
With knowing all these charges in advance, the lender would not be able to charge any hidden fee on your loan account. All the information related to business loans will be crystal clear to you.