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Personal Loan Processing Fees

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What is Personal Loan Processing Fees

The personal loan processing fee is a one-time fee lenders charge to cover the administrative costs of processing and disbursing the personal loan. The fee is usually deducted upfront from the loan amount or added to the loan's total cost. In India, lenders usually charge a processing fee f of up to 5% of the personal loan amount.

Why Do Banks Charge a Processing Fee?

Lenders charge a processing fee to recover costs incurred during the loan application process. These costs are associated with:

  • Loan application review
  • Document verification
  • Credit score check
  • Risk assessment
  • Loan processing
  • Loan disbursal

How Much is the Processing Fee for a Personal Loan?

The personal loan processing fee usually ranges between 0.5% and 5% of the loan amount. However, it may vary across lenders.

Take a look at the following table to understand how different percentages of processing fees will cost you:

Loan Amount 1% Fee 2% Fee 3% Fee
Rs. 1 Lakh Personal Loan Rs. 1,000 Rs. 2,000 Rs. 3,000
Rs. 3 Lakh Personal Loan Rs. 3,000 Rs. 6,000 Rs. 9,000
Rs. 5 Lakh Personal Loan Rs. 5,000 Rs. 10,000 Rs. 15,000
Rs. 10 Lakh Personal Loan  Rs. 10,000 Rs. 20,000 Rs. 30,000

How to Calculate Personal Loan Processing Fee

Let’s take an example to understand how to calculate personal loan processing fees.

Assumptions

  • Loan Amount: Rs. 5,00,000
  • Processing Fee: 2% of the loan amount (plus GST, if applicable)

Calculation

Step 1: Calculate Processing Fee

(2/100) × Rs. 5,00,000 = Rs. 10,000

Step 2: Calculate GST (18%)

GST = (18/100) × Rs. 10,000 = Rs. 1,800

Total Processing Fee Payable

Rs. 10,000 + Rs. 1,800 = Rs. 11,800

What You'll Receive

Lenders can either deduct the processing fee before disbursing the loan or add the fee to the total cost of your personal loan.

If the lender deducts the processing fee before disbursing the loan:

  • Approved Loan Amount: Rs. 5,00,000
  • Processing Fee + GST: Rs. 11,800
  • Amount Credited to Your Bank Account: Rs. 4,88,200

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Personal Loan Processing Fees Charged by Top Banks

Take a look at processing fees charged by top lenders in India in 2026:

Bank/NBFC Processing Fees
Aditya Birla Finance Up to 4%
Axis Bank Up to 2%
Bank of Baroda Up to 2% (Max. Rs. 10,000)
Bajaj Finance Limited Up to 3.93%
Bank of India Up to 1% (Min. Rs. 250; Max. Rs. 15,000)
Bank of Maharashtra Up to 1% (Max. Rs. 10,000)
Canara Bank* Up to 0.5% (Max. Rs. 5000)
Central Bank of India Up to 1%
Cholamandalam IFC 4% - 6%
Dhani Loans & Services Ltd. 3% onwards
Federal Bank Up to 3%
HDB Financial Services Up to 5.90%
HDFC Bank Up to Rs 6,500
Hero Fincorp 2.5% onwards
HSBC Bank Up to 2%
ICICI Bank Up to 2%
IDFC FIRST Bank Up to 3.5%
IIFL Finance Up to 5%
Indian Overseas Bank Up to 0.75%
IndusInd Bank Up to 3.5%
Kotak Mahindra Bank Up to 5%
L&T Finance Up to 4%
Mahindra Finance 2% of the loan amount or Rs. 5,000, whichever is lower
Mannapuram Finance 1% of loan amount
Moneyview 2% onwards
Muthoot Finance Varies for each application
Piramal Finance Up to 5%
Poonawalla Fincorp Up to 3%
Punjab & Sind Bank 0.50% - 1%
Punjab National Bank Up to 1%
Shriram Finance Up to 5%
Tata Capital Up to 3.5%
UCO Bank Up to 1% (Min. Rs. 750)
Union Bank of India Up to 1% (Max. Rs. 7,500)

Note: Charges as of 1st July 2026

Zero-Processing-Fee Personal Loan

A zero-processing-fee personal loan refers to personal loan offers without any processing fees. Lenders usually carry out limited-period offers with no processing fees on personal loans. Zero processing fees can help borrowers save on the total cost of their loan. A zero processing fee is offered:

  • During festive seasons: Like Diwali, Dussehra, etc.
  • Salary account offers: Some lenders offer zero processing fees to their salary account holders.
  • On pre-approved loans: Sometimes, pre-approved offers do not carry any processing fee.

Is the Personal Loan Processing Fee Refundable?

No, the processing fee is a one-time non-refundable charge. Even if the personal loan is cancelled within the cooling-off period, the processing fee is not refunded. This is because the lender charges the processing fee to cover the cost of loan processing, including verification, risk assessments, credit score checks and more.

GST on Personal Loan Processing Fee

18% GST is charged on the processing fee of your personal loan. Most lenders deduct GST upfront from the loan principal before disbursal.

Example

  • Loan Amount: Rs. 5,00,000
    • Processing Fee: 2% of the loan amount
    • Processing Fee: Rs. 10,000
  • GST on Processing Fee: 18% of Rs. 10,000 = Rs. 1,800
    • Total Deduction:
    • Rs. 10,000 + Rs. 1,800 = Rs. 11,800
  • Amount Disbursed
    • Sanctioned Loan Amount: Rs. 5,00,000
    • Less: Processing Fee + GST: Rs. 11,800
  • Net Loan Amount Disbursed: Rs. 4,88,200

Other Charges on a Personal Loan

Other than the processing fee, lenders also levy various charges on your personal loan, including:

  • Stamp Duty: As per actuals
  • Foreclosure Charges or Part Payment Charges:
    • For Floating Rate: Nil
    • For Fixed Rate: Usually around 2% - 5% on the principal outstanding
  • EMI Bounce Charges: Usually around Rs. 3,000
  • Penal Interest: Usually @ 2% per month; 24% p.a.
  • Loan Cancellation Charges: Around Rs. 400 per bounce

Tips to Reduce Personal Loan Processing Fees

  • Compare lenders: Comparing personal loan offers from different lenders helps you choose the best personal loan with the lowest processing fee.
  • Maintain a good CIBIL Score: A strong credit score helps you negotiate with lenders for lower processing fees.
  • Apply during festive offers: Usually, lenders waive processing fees during festive seasons. Apply for a personal loan during the offer period can help you get a zero-processing-fee personal loan.
  • Choose the salary account bank: Lenders often waive processing fees for their salary account holders.
  • Check Paisabazaar's exclusive offers: On Paisabazaar, certain eligible applicants can get personal loans at low/no processing fees, depending on the offer criteria they fall into.

Processing Fee vs Interest Rate

Personal loan Interest rate and processing fee are two different charges for personal loans. For your better understanding, the difference between the two is given below in the table.

Processing Fee Interest Rate
One-time Recurring
Paid upfront Paid monthly
Administrative charge Borrowing cost
Subject to GST No GST

How to Calculate the Actual 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 interest but also additional charges such as processing fees and verification costs.

What is APR?

APR (Annual Percentage Rate) is the annualised cost of borrowing, expressed as a percentage. It includes:

  • Interest rate
  • Processing fee
  • Documentation/administrative charges
  • Any other fees incurred during loan disbursal
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FAQs

What is the processing fee for a personal loan?

The personal loan processing fee is a one-time charge levied by lenders to cover administrative costs.

Is GST applicable to processing fees?

Yes, GST applies to the processing fees of a personal loan.

Can a personal loan processing fee be refunded?

No, personal loan processing fees are non-refundable.

Can I get a zero-processing-fee personal loan?

Yes, lenders sometimes offer low/no processing fees on personal loans for a limited period, especially during festive seasons.

Is the processing fee deducted from the loan amount?

Yes, lenders usually deduct processing fees from the loan amount.

Can I negotiate the processing fee with the lender?

Yes, you can negotiate with the lender for a lower processing fee on your personal loan.

Does every lender charge a processing fee?

Most lenders charge a processing fee on their personal loans. However, some lenders may waive processing fees on specific personal loan schemes offered by them.

Is the processing fee included in EMI?

No, the processing fee is usually not included in your loan EMI.

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Paisabazaar is a loan aggregator and is authorized to provide services on behalf of its partners.

The APR (Annual Percentage Rate) of a personal loan is its annualised cost of borrowing, which includes the interest rate as well as the processing fees, documentation fees and other fees charged during the loan origination. The APR is expressed in the form of a percentage and thus, allows personal loan applicants to detect personal loan schemes offered at lower interest rates but with higher processing fees and/or other charges.

The APR of personal loans usually ranges between 11.29% to 35%. For example, assume that you have availed a personal loan of Rs. 5 lakhs @ 10.50% p.a. with a repayment tenure of 5 years. The processing fee charged for this loan is 1.5% of the loan amount, which amounts to Rs 7,500. Therefore, the total borrowing cost of your personal loan will be Rs 1,52,317 and its APR will be 11.16%.

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