Hidden Charges of Personal Loans Explained: Don't Overpay in 2025

When securing a personal loan, most borrowers take a quick look at the interest rate, calculate the amount they would have to pay, and sign it off expecting it to be a smooth ride. The reality, however, is that most lenders today introduce various hidden charges, penalties and other fees that are not disclosed upfront, and later turn into a horribly frustrating experience. Borrowers end up paying a larger sum than anticipated, with no fault of their own. That’s where IDFC FIRST Bank stands apart. With a completely transparent, fully digital process and customer-friendly policies for a instant loan, hidden charges are eliminated, while standard fees are communicated upfront. No charge will take you by surprise, ensuring a smooth and stress-free repayment journey on your terms.

It's a fairly common practice for lenders to charge a fee if you repay your loan before the repayment tenure ends. This fee generally ranges between 2-5% of the outstanding loan amount. Even after paying off the loan from your hard-earned savings, you may end up losing a chunk of it for simply being early. With IDFC FIRST Bank, however, you can leave those worries aside with zero foreclosure charges on personal loans, supporting your repayment journey.

A processing fee is a standard one-time charge on the loan amount, ranging from 1-3% of the total amount which is deducted from this amount at the time of disbursal. While this a standard procedure, IDFC FIRST Bank, clearly discloses this upfront, and their 100% digital process ensures that there are no additional courier fees or handling charges that are disclosed at the very end taking you by surprise.

Most lenders follow a more traditional approach to documentation and paperwork, filling up endless pages of unnecessary information and eventually charging a fee for this under the guise of ‘processing fees’ or ‘miscellaneous charges’. This could include fees for physical paperwork processing, courier dispatch, or account verification, and are often not disclosed clearly upfront. You may only come across them after the loan has already been disbursed. The process for a IDFC FIRST Bank Personal loan is completely digital, eliminating the need for such charges.

Missing an EMI comes with a barrage of charges and heavy penalties. Most lenders charge a late payment fee ranging from ₹500 to ₹1,000 per missed EMI, and some even charge a fee daily. In addition to these charges, there is often a penal interest of 2-3 % on the overdue amount. With IDFC FIRST Bank, you can expect proactive alerts to help you stay aware and on schedule with your EMIs.

For EMIs, there is often an auto-debit automation set up to help you stay on schedule even if you forget or miss a payment. Each failed payment can negatively impact your credit score, making future loans difficult. Lenders often charge between ₹300 to ₹500 per failed attempt. IDFC FIRST Bank ensures to send timely EMI reminders giving you a chance to ensure your account is adequately funded before the debit occurs. This extra support helps you protect your credit health and avoid unnecessary fees.

The method used by lenders to calculate interest can have drastic impacts on the loan’s real cost. Some lenders use the flat-rate interest method, which charges interest on the full loan amount throughout the entire loan tenure, regardless of how much principal you’ve already paid. IDFC FIRST Bank uses the reducing balance method, meaning interest is charged only on the outstanding balance, not the entire loan amount. This ensures that as you repay your principal, your interest burden decreases accordingly, keeping your loan more affordable over time. Use an EMI Calculator for Personal Loan to see the difference clearly.

Many lenders enforce a lock-in period on loans, which means a minimum number you must pay before you are allowed to prepay your loan in its entirety. These periods typically last 6 to 12 months, basically forcing you to keep paying EMIS even when you’re ready to pay it off earlier. With IDFC FIRST Bank’s personal loans, there is no such restriction imposed. You can close your loan early with zero foreclosure charges.

From zero foreclosure charges and fully digital documentation to complete fee disclosures and flexible repayment terms, FIRSTmoney by IDFC FIRST Bank is redefining the personal loan experience. Your journey from application to closure is simple, stress-free, and cost-effective. When it comes to borrowing, it’s not just about getting the funds, it’s about doing it the right way. And with IDFC FIRST Bank, your journey stays clear, fair, and fully in your control.