The adoption of the Goods and Services Tax (GST) has revamped the tax framework for sectors including banking and financial services. Under this regime, banks and financial institutions render services subject to an 18% GST rate. Borrowers often question whether GST has made personal loans more expensive and if it affects their monthly EMI payments.

Understanding GST's Impact on Personal Loans

Many borrowers are concerned that GST might have raised personal loan interest rates. It's crucial to note that while GST influences specific loan components, it does not alter interest rates. Let’s delve into how GST impacts personal loans:

GST and Interest Rates

Interest on personal loans is determined by lenders based on factors like borrower's creditworthiness and market trends. GST does not apply to the interest component. Instead, interest remains a fixed rate for using borrowed funds, thus unaffected by GST.

Components of a Personal Loan Affected by GST

Although interest rates remain intact, certain loan elements are liable for GST, such as:

• Processing Fee: This fee, charged for application processing and fund disbursement, bears an 18% GST. For example, on a ₹50,000 loan with a 4% processing fee, GST would raise the total from ₹2,000 to ₹2,360.
• Prepayment or Pre-Closure Fees: If you repay or close a loan early, GST applies to the prepayment service fee. For instance, a 3% fee on a ₹50,000 loan results in a payable total of ₹1,770 after GST.

Despite GST's influence, the overall effect on fees is marginal. Nonetheless, strategies can mitigate it:

Strategies to Minimize GST on Personal Loans

Consider these strategies to manage GST costs:

• Select Loans with Lower Processing Fees: Less processing fee means a reduced GST amount. Compare loan offers to find minimal processing charges.
• Opt for Loans with No Prepayment Fees: Some lenders waive prepayment fees, eliminating GST on such charges. Review prepayment terms before committing.
• Balance Fees and Interest Rates: While minimizing GST is vital, consider the total loan cost, including interest rates, to secure a cost-effective solution.

Money View Personal Loans: Saving on GST

Money View is a respected lender offering competitive rates and minimal documentation. Here's how they help in reducing GST burden:

• Competitive Interest Rates: With attractive rates starting at 1.33% monthly, overall loan cost remains manageable despite GST on other components.
• Low Processing Fees: With starting fees at 2%, GST impact on processing fees is minimized. For a 2% processing fee on a ₹50,000 loan, the GST amount is notably lower.
• No Prepayment Charges: Enjoy future savings as no GST is applied to prepayment charges, thanks to Money View’s no-fee policy.

The GST regulation, effective from July 1, 2017, standardizes an 18% rate for most services in India, excluding petrol products, alcohol, and electricity, simplifying the tax system for clarity among providers and consumers.

Conclusion

GST's introduction shifted the tax landscape, affecting services like personal loans. While marginally increasing processing and prepayment fees, GST hasn’t critically influenced personal loan interest rates. Monthly EMI impact is minimal. Money View emerges as a viable personal loan option with competitive rates, low processing fees, and no prepayment charges. By leveraging these advantages, borrowers can effectively manage GST costs and enhance their borrowing experience.

For more details on Money View personal loans or to apply, visit the Money View website or download the app.