Personal loans can be a lifesaver when you need quick financial support—whether for medical emergencies, higher education, weddings, or unexpected expenses. But while personal loans offer flexibility, many borrowers often overlook a critical detail: hidden charges.

Hidden fees can increase the cost of borrowing and put unnecessary pressure on your finances. That’s why it’s important to understand and identify these charges before you sign on the dotted line.

Here are 6 key tips to spot hidden charges in personal loan agreements and make smart borrowing decisions.

1. Check the Processing Fee

Most lenders charge a processing fee, which is deducted upfront from the loan amount. While this is standard, the percentage can vary widely—from 1- 3 per cent of your loan amount. Always ask for clarity on how much will be deducted and factor it into your borrowing cost.

2. Look for Prepayment & Foreclosure Charges

If you plan to repay your loan early, lenders may impose prepayment or foreclosure penalties. These charges can range from 2% to 5% of the outstanding loan amount. Borrowers often miss this detail, only to be surprised later when they try to clear their debt early.

3. Understand Late Payment Penalties

Missing an EMI does not just affect your credit score—it also leads to late payment penalties. These can be a fixed amount or a percentage of the EMI. Over time, they can add up and make your loan much costlier.

4. Watch Out for Documentation & Verification Fees

Some lenders add documentation, verification, or legal charges that are not clearly mentioned at the beginning. While they may seem small individually, they can increase your upfront costs.

5. Clarify GST & Other Statutory Taxes

Every fee—whether processing, prepayment, or penalty—may attract GST or other statutory taxes. These additional charges often go unnoticed, but they increase the effective cost of your loan.

6. Read the Fine Print Carefully

Many hidden charges are buried in the terms and conditions of the loan document. Rushing through this can cost you later. Take your time, read every section, and don’t hesitate to ask questions.

Conclusion

Borrowing should bring relief, not stress. By being aware of hidden charges and asking the right questions, you can protect yourself from unnecessary costs and make your loan work in your favor.

At Dravyam Fintech, the belief lies in complete transparency. With no hidden fees, clear communication, and a hassle-free loan  process. They ensure that your loan experience is smooth and stress-free from the beginning.