What are the charges if the borrower misses a monthly payment?
The bank, through the relationship managers, urges borrowers to repay loan early to avoid late payment by accident or by mistake. The repayment due date typically falls on the first day of the month. From the 8th day, the overdue amount is charged daily at prevailing interest rate plus 3% p.a. or more, counting from the due date until the day the due amount is paid.
For example, if a customer pays on the 8th day, late payment charge = $500 * (8% + 3%) / 360 days * 7 late days = $1.07.
If the borrower misses three monthly payments in a row, the prevailing interest rate will be increased by 2% p.a. or more. For example, instead of paying interest at 8%, the borrower will pay 10% for the remaining outstanding amount.