What is the processing fee on personal loans?

Personal loans can help you secure credit very easily, without offering any collateral in exchange. Thus, they have become a reliable way of getting personal loans for many people. Now, while applying for a personal loan has its usual cost, such as the rate of interest, there is another thing that many people forget about – the processing fees. What is a loan processing fee? It is the fee charged by lenders to cover the administrative costs involved in approving your loan. These extra fees can make your personal loan offer more expensive. What is processing fee in loan? It refers to the percentage or flat fee that is applied during the loan approval process. Thus, you should only apply for a personal loan from your preferred bank or lender, once you have gone through all the details and are sure that you will be able to bear the total cost of the loan, which includes the interest, any processing fees, and other charges. Some lenders offer the lowest processing fee for personal loans, which can make a significant difference in the overall cost.

In this blog, we will take you through some of the most common processing fee for personal loan terms and how much they cost.

What are some common processing fees and charges on personal loans?

Given below is the list of processing fee for personal loan charges by various banks or personal loan lenders in India:

Processing charges on personal loans

Whenever you are applying for a personal loan, any bank will charge you a personal loan processing fee, which is meant to cover up the administration charges the bank bears to process your loan application. 

The personal loan processing charges are usually less and vary from one bank to another. You can choose whether to pay the processing fee right away or have the processing fee deducted from your loan amount.

Read more: The top 7 benefits of applying for a personal loan

Verification charges on personal loans

Before any bank grants you a personal loan, they need to be completely sure that you are well within your financial limits to pay the loan amount back. Now, to ensure this, banks usually take the help of third-party agencies, who verify your credentials and documents. 

The agencies will also go through your credit score, your credit repayment history, and other details. Thus, it is an extra cost that is borne by the bank to provide you with the credit. This cost is then eventually passed on to you as a processing fee in personal loan applications.

Goods and Services Tax

While applying for the personal loan, you are also mandated to pay a small amount as Goods and Services Tax (which is better known as GST) to the government of India. Processing fees of personal loans are also subject to this tax, making it another cost to consider.

Read more: How to get a personal loan for self-employed in India

Penalty on late EMI payments

For any loan, you have to pay back the amount with monthly instalments or EMIs that are pre-determined when you are applying for the loan. Now, whenever you do not make these payments, there will be added penalties on you. This is charged because the borrower is supposed to pay the EMIs on time. Make sure that you always pay your EMIs on time to avoid these fines, which only add to your cost of personal loan.

Penalty for foreclosing your personal loan

Penalties are also charged on personal loan borrowers who choose to prepay or foreclose their loans. This is usually charged because when you pay off the loan before time, the bank ends up making a loss because they aren’t getting the interest payments that they had originally planned. What is the processing fee for a loan? It includes these prepayment charges, along with other associated costs. Foreclosing personal loan charges usually vary between 2% to 4%, and can depend from bank to bank.

Read more: All about personal loan prepayment – charges, benefits, etc.

Fees for duplicate statement

Banks can also charge you for generating a copy of your payment schedule and outstanding loan balance. It will cost you around ₹200 to ₹500 and can also vary from one bank to another.

Processing fees for various personal loan lenders

When you apply for a personal loan from Airtel Flexi Credit, the loan processing fee will always be kept at a low amount. Airtel Finance ensures that the processing fees are between 2% to 5% + GST. Here’s a breakdown of the various processing fees for different personal loan lenders that have tied up with Airtel Finance:

• DMI Finance: up to 4% of the loan amount

• Money View: starts from 2% of the loan amount

• Axis Bank: up to 2% of the loan amount

• Credit Saison India: up to 5% of the loan amount

Get a personal loan from Airtel Flexi Credit

Thus, if you are applying for a personal loan and the high processing fees as well as other added charges are bothering you, then consider checking out Airtel Flexi Credit. Get the best personal loan offers, with easy repayment schemes, low-interest rates and a 100% digital application process!

FAQs

What does a loan fee entail?
A loan fee typically includes various charges such as the personal loan processing fee, verification charges, Goods and Services Tax (GST), penalties for late EMI payments, foreclosure penalties for early repayment, and charges for duplicate statements. These fees cover the administrative costs incurred by the lender while processing and managing your loan.

Can I obtain a loan for 0%?
While some lenders may offer promotional loans at 0% interest, personal loans generally come with associated fees like processing fees, verification charges, and GST. For example, Airtel Flexi Credit offers loans with a processing fee of 2% to 5% + GST, but no mention of a 0% loan was provided in the content.

Which loan is less expensive?
Loans with lower processing fees and interest rates are considered less expensive. For instance, Airtel Flexi Credit offers competitive rates with processing fees ranging from 2% to 5%, depending on the lender. Options like Money View, with a starting processing fee of 2%, could be more affordable compared to others with higher fees.