Personal Loan

What Is A Processing Fee For Personal Loans?


You may consider personal loans a great financial instrument to cover your costs. However, a personal loan has additional fees in addition to interest. In addition to processing costs, lenders impose several extra fees on the sum of personal loans.

Before considering the Processing Fee for a Personal Loan is crucial. Therefore, before applying for a loan, whether offline or through a personal loan app, you must inquire with your lender about and take into account any fees that will be associated with it.

Let’s explore the meaning of the processing fee for a personal loan and the justification for personal loan lenders charging it.

Introduction to Processing Fee For Personal Loan

Lenders provide personal loans to borrowers to ensure they have enough money to pay their bills. However, the sanctioning and disbursement of the loan money into the borrower’s bank account involves several procedures, one of which is loan processing.

In this phase, the lender processes the borrower’s loan application and examines their supporting documentation. In addition, processing a loan entails going through administrative procedures to establish a binding legal agreement between the borrower and the lender.

An administrative fee for processing a borrower’s loan application and establishing a binding loan agreement is imposed by the lender on the borrower as compensation. A processing fee for personal loans typically amounts to 0.5% to 4% of the sanctioned amount and is based on the loan amount supplied by the lender to the borrower. Lenders must now legally add GST to the loan processing cost due to the adoption of the GST.

Common Charges for Personal Loans

Processing Fees

A bank will spend money processing a loan that is connected to the administration. Typically, this amount ranges from 0.5% to 4%. There are variations in the processing costs for personal loans between banks. When applying for a personal loan, the borrower has two options:

(I) pay the processing charge up front, or

(II) have it subtracted from the loan amount when it is disbursed.

Verification Charges

Before approving the loan, a bank must be confident that you can repay it. They employ a third-party business to examine your credentials to do this. Your credit record and loan repayment history is examined. The expenses involved are an added cost that impacts the bank and must be paid for by the borrower. This outlay is thought of as a verification charge.


For any additional services required during the loan application process or loan repayment period, the loan applicant must pay a small fee in the form of GST.

Prepayment Penalty

You pay interest on the Loan, which is how the banks make money. Your bank might suffer a loss if you pay off your debt earlier than the agreed-upon duration since you would be paying off your loan early. Your bank could charge a prepayment penalty on you to make up for this loss.

Penalty on late payment of EMIs

When a person takes a loan, they must pay it back in EMIs or equated monthly instalments. The borrower is in charge of ensuring that the EMIs are paid on schedule. If you fail to pay an EMI payment, you will be penalized. As a consequence, it is critical to plan your finances and loan conditions correctly, as well as to establish the EMI amount in advance.

The Procedure of Charging Processing Fees

Processing Fee For Personal Loans may be assessed in various ways by various lenders. For instance, online lenders follow the policy of subtracting the processing cost from the loan amount at the time of disbursement. Some other lenders cash your processing fee check after your loan is approved.

The processing costs can thus be requested in advance or subtracted from the loan amount when the lender disburses it.

Again, you should be on guard if the lender tries to cross-sell you any other products, such as insurance or a credit fitness report, as a condition of obtaining the loan. The best course of action is to compare your lenders’ fees to those of other lenders offering the same loan amount in the market.

Eligibility for Personal Loans

  • Age: You should be between the range of 21 and 45.
  • Employment: When applying for a personal loan, you should have a full-time job in a private or public organization.
  • Work experience: Additionally, you will need to have a minimum of six months of work experience.
  • Tenure: This position should be retained for a minimum of three months.
  • Income credit: Your bank account should be credited with your income.
  • Paycheck: If you work and live in a Tier-I city, your monthly take-home pay should be at least Rs. 20,000. A Tier-II applicant’s take-home pay must be greater than Rs. 15,000 per month.

Get a Personal Loan with Piramal Housing Finance

You can analyze and compare personal loans from various lenders based on their fees and their effect on your finances when you take out the loan.

Piramal Housing Finance is India’s top financial services provider and offers comprehensive and personalized personal loans to meet your funding needs. To calculate your repayment requirements, use the personal loan calculator.

We have a group of knowledgeable advisers that can assist you throughout the full application procedure, assuring prompt approvals and quick disbursement into your account.


Even with these fees, a personal loan may be a valuable source of funding in times of need. Learn from Piramal Housing Finance how a personal loan might save you in the appropriate circumstances.

If you are looking for more advice on personal loans, reach out to us today.


Does the processing cost come out of the loan amount?

It is a one-time cost that is usually paid in advance. The processing fee is often only assessed following the approval of your application.

Are processing charges allowed by law?

Yes. The card brand or card product, but not both, can be used by merchants to impose different fees.