There are two types of fees/charges that you may have to pay at the time of taking the loan (this amount gets deducted from the loan amount, and the remaining balance comes to your bank account).
- Processing Fee
This fee is charged for processing your loan and it’s deducted from the loan amount that you will get. This fee can be either:
1. Between 2.5% to 5% of the loan amount (it may depend on the loan amount, duration, etc).
2. Rs. 1,000 + GST
The processing fee will be the higher of these two options (whichever calculation is higher will become the processing fee).
All EMIs take place in monthly cycles and will be on the 5th of every month (for example - the cycle will be 5th June to 5th July, 5th July - 5th August).
You may take a loan on any day of the month (does not have to be the 5th of the month, for example, you can take it on the 10th or 20th). In such cases, the date from which you get a loan to the first EMI date can be more or less than a month.
If you have the loan amount for any extra number of days (if the date from when you get the loan to the first EMI date is more than one month), then you need to pay interest on the loan for those extra days. This interest charged for having the money for extra days is called Pre-EMI interest.
- If you take a loan on or before the 15th of a month, your first EMI date will be the 5th of the next month. For example, if you take a loan on 10th May, then your first EMI date will be 5th June. In this example, the time from getting the loan (10th May) to the first EMI date (5th June) is less than 1 month. No Pre-EMI interest will be charged here (in fact, since you have the money for lesser than a month, the interest from 5th May to 10th May will be reduced overall from all EMIs).
- If you have taken a loan after the 15th of a month, your first EMI date will be the 5th of the month after (one month after the next month). For example, if you take a loan on 20th May, then your first EMI date will be 5th July.
In this example, the time from getting the loan (10th May) to the first EMI date (5th June) is more than 1 month (20th May to 5th June will be the extra days). Here, you will have to pay interest for the extra days (Pre-EMI interest).
This Pre-EMI Interest, along with the processing fee will get reduced from your loan amount and the remaining balance will come to your bank account.