A processing fee is a one-time fee levied by lenders to cover the administrative costs involved in processing and disbursing a personal loan. The fee is usually deducted upfront from the loan amount or added to the total cost of the loan.
Why Do Lenders Charge a Processing Fee
Lenders charge a processing fee to recover costs incurred during the loan application process. This includes document verification, employment and income checks, and other administrative procedures to assess the borrower’s creditworthiness.
How Much Is the Processing Fee on a Personal Loan
Personal loan processing fees usually range between 0.5% to 4% of the loan amount. While some public sector banks may charge lower fees, private banks and NBFCs can charge higher fees based on their internal policies and the applicant’s credit profile.
Is the Processing Fee Refundable
Processing fees are usually non-refundable, even if your loan application is rejected or if you cancel the loan post-approval. However, some lenders may offer promotional waivers or lower processing fees during festive seasons.
Complete List of Personal Loan Fees & Other Charges
| Charge Type | Description |
| Processing Fee | 0.5% to 4% of the loan amount; capped by some lenders |
| Prepayment/Foreclosure Charges | NIL for floating rate loans (as per RBI); fixed rate loans usually range around 2% – 5% on the principal outstanding |
| Stamp Duty Charges | As per actuals |
| Loan Cancellation Charges | Usually around Rs 3,000 |
| Loan Statement Charges | Often NIL or up to Rs 500 per statement |
| Documentation Charges | Around Rs 500 |
| Verification Charges | Around Rs 500-Rs 1,000 |
| GST | Applicable on all processing fees and charges |
Charges Related to Late/Missed EMI Payment Charges
Most banks and NBFCs charge late payment fees, bounce charges, etc, on missed personal loan EMI payments by the due date.
| Charge Type | Description |
| Late EMI Payment Penalty | Usually 2% to 3% per month on the overdue EMI amount |
| EMI Bounce Charges | Up to Rs 450 per instance |
| Cheque Bouncing or Failed SI Charges | Up to Rs 500 – Rs 750 per instance |
Processing Fees on Personal Loan To Pensioners & Defense
The processing fees on personal loan offered to defense and pensioners are usually NIL or lower than those offered to regular salaried or self-employed individuals.
| Bank | Processing Fee |
| SBI Personal Loan to Defense Sector Employees | 100% waiver |
| PNB Personal Loan to Defense Personals | NIL |
| Central Bank of India Personal Loan to Pensioners | NIL |
| Bank of India Personal Loan – Star Pensioner Loan Scheme | Senior Citizen (60 years & above)- NIL For others- One time @ 0.50% (Rs 250-Rs 1,000) |
| Baroda Pensioners Loan | Rs 1,000 |
Bank/NBFC-wise Personal Loan Processing Fees 2025
| Bank | Processing Fee | Loan Amount | Interest Rates (p.a.) |
| SBI | Up to 1.5% of the loan amount (Min. Rs 1,000; Max. Rs 15,000) | Up to Rs 35 lakh | 10.30% – 15.30% |
| HDFC Bank | Up to Rs 6,500 | Up to Rs 40 lakh | 10.90% – 24.00% |
| Punjab National Bank | Up to 1% of the loan amount | Up to Rs 20 lakh | 11.00%-17.55% |
| Tata Capital | Up to 5.5% of the loan amount (Up to 4% for instant personal loan up to Rs 1 lakh) | Up to Rs 35 lakh | 11.99% onwards |
| ICICI Bank | Up to 2% of the loan amount | Up to Rs 50 lakh | 10.85% – 16.65% |
| Axis Bank | Up to 2% of the loan amount | Up to Rs 10 lakh | 11.25% onwards |
| Kotak Mahindra Bank | Up to 5% of the loan amount | Up to Rs 35 lakh | 10.99% – 16.99% |
| IDFC FIRST Bank | Up to 2% of the loan amount | Up to Rs 10 lakh | 10.70% onwards |
| IndusInd Bank | Up to 3.5% of the loan amount; 2% for Instant Personal Loan | Up to Rs 50 lakh (Up to Rs 5 lakh for instant personal loan) | 10.49% onwards |
Last updated on 26 May 2025
How much GST do you have to pay on a personal loan
GST at the rate of 18% p.a. is applicable to processing fees, verification and documentation charges, EMI dishonor charges, foreclosure charges, etc. This tax adds an extra cost to your personal loan. However, the principal amount and the interest paid are not subject to GST.
Let’s take an example – You have applied for a personal loan of Rs 5 lakh from HDFC Bank. The bank charges a processing fee of Rs 6,500. The GST on the processing fee would be Rs 1,170 (18% of Rs 6,500). The total processing fee you would have to pay would be Rs 7,670.
How to Calculate the True Cost of a Personal Loan?
To accurately understand the true cost of a personal loan, it’s important to consider fees and charges along with the personal loan interest rate. The Annual Percentage Rate (APR) gives a clearer picture of the total borrowing cost by factoring in not only the interest but also additional charges like processing fees and verification costs.
What is APR?
APR (Annual Percentage Rate) is the annualized cost of borrowing, expressed as a percentage. It includes:
- Interest rate
- Processing fee
- Documentation/administrative charges
- Any other fees incurred during loan disbursal
You can use an APR calculator available online. Let’s say you availed a personal loan of Rs 5 lakhs @ 11% p.a. with a 5-year repayment tenure. The processing fee charged is 2% of the loan amount, which amounts to Rs 10,000. Therefore, its APR will be 12.89% and the total borrowing cost of your personal loan will be Rs 1.80 lakh.
Why Borrowers Must Be Aware of Personal Loan Charges
Most applicants focus only on the interest rate before applying for a personal loan. Overlooking associated charges can significantly impact the overall cost of the borrowing. Fees such as foreclosure penalties, processing charges and verification fees can quietly add up, turning what seems like an affordable loan into an expensive one.
Here’s how being aware of these charges can help you make more informed decisions:
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Knowing charges levied by lenders can help you compare multiple personal loan offers effectively. Sometimes, a lower interest rate comes with higher hidden charges.
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Awareness of fees allows you to calculate the accurate total cost of the loan and plan your budget accordingly.
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Understanding pre-closure/fore-closure or part-payment charges can help you decide if early repayment is cost-effective.
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Some fees, like processing fees, documentation or verification charges, are non-refundable even if your loan gets rejected.
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Transparent knowledge of fees and charges makes the loan journey smooth, preventing disputes or dissatisfaction later.
