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Personal Loan Processing Fees and Charges

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Created on
January 19, 2023


What’s Inside

Personal loans are popular these days, yet many folks remain unaware of all the fees & charges associated with loans, most of which are hidden or not called out upfront. Nowadays, people use personal loans to generate funds to go on vacations, fund a marriage, for home renovation, or for emergency expenses like medical treatment. 

Nonetheless, however tempting your loan interest rates may be, it's best to understand all the loan-related charges levied upon you (like personal loan processing fee) — all of which add to the total cost of any personal loan. In this blog, we will take you through what the personal loan processing fees are and how they are calculated. 

What Are Personal Loan Processing Fees and Charges?

So, besides the loan itself, are there any other charges related to a personal loan? There certainly are, and most people overlook them while taking a personal loan. To learn more about instant personal loans that are 100% paperless, go here

Each personal loan has a particular tenure and a loan amount. The loan will have to be repaid by the stipulated tenure. Salaried individuals can avail of these quite easily. Besides this, there are specific fees related to personal loans and all loans, in general. These include foreclosure charges, personal loan processing fees, etc. Please consider these while taking a loan, as they may influence your budget. 

List of Common Personal Loan Processing Fees and Charges 

Loan Processing Fees

When taking a personal loan, the processing fee is one of the most crucial fees to consider. When you apply for a loan, your loan is processed to ascertain whether you are eligible to take the loan. There are costs that a bank or financial institution incurs while undertaking this administrative activity. The fees are minimal but vary from institution to institution, ranging between 0.5%-2.50% (of the total loan amount). Individuals may initially opt to bear the costs of processing fees or have it deducted from the amount of the loan taken. You can use an online calculator or check your lender's portal for fee details.

Verification Charges

All lenders verify an applicant’s documents. It checks whether an applicant can repay the loan in a specified tenure. Typically, most banks do this in-house, but outside agencies may also be hired for the verification process. An applicant’s credit score, previous loan/credit payment patterns, etc., are gauged as part of this process. This cost has to be borne by the loan applicant. 


The Goods and Services Tax (GST) is part of a fee that has to be borne by personal loan applicants. It's separately charged alongside the bank processing fee. Applicants must pay this charge when loans get sanctioned or when repayment occurs.

Penalties for Default on EMI

EMIs, or equated monthly instalments, are the repayments made (per month) for any loan taken. These EMIs, apart from the break-up of the actual loan amount, consist of interest rates charged by your bank or lender. Borrowers should be responsible enough to pay EMIs in total and on time. If this isn't done, the borrower becomes a defaulter and gets charged a late fee. This penalty could be high as the lender decides on it. 

Charges for Personal Loan Foreclosure

If a borrower wishes to repay the entire loan amount before the end of their tenure, they are permitted to foreclose the loan by paying it. Yet, paying the loan off before its tenure means that the lender can no longer benefit from interest charges from the borrower — so borrowers get charged a fee when they pre-pay a loan before its conclusion. It can vary per lender, but it is usually within 2% and 4% of the loan amount. 

Fees for Duplicate Statements

It's a hard truth that fees apply to most aspects of a loan. For instance, you will get charged if you wish for a duplicate statement of your payment schedule. Like many other charges by lenders, this fee changes from one lender to the other. It can range between ₹200 to ₹500 and, in rare cases, over ₹500. 

How Are Personal Loan Processing Fees Calculated?

Personal loan processing fees are typically calculated as a percentage of the loan amount and may vary among lenders. The specific percentage can range from 1% to 3% or more of the loan principal.

For example,

It's crucial to check the lender's terms and conditions for their specific processing fee structure, as it can vary based on the loan amount, tenure, and other factors.

How to Avoid Unnecessary Personal Loan Charges?

To avoid unnecessary personal loan charges, follow these steps:

  • Compare Lenders: Research and compare lenders to find the one with the lowest fees and interest rates.
  • Read the Fine Print: Carefully review the loan agreement to understand all charges and terms.
  • Maintain Good Credit: A strong credit score can help negotiate better terms and lower charges.
  • Avoid Late Payments: Pay EMIs on time to avoid late payment fees.
  • Prepayment Planning: Plan prepayments to minimize prepayment charges.
  • Negotiate: Negotiate with the lender to reduce or waive certain fees.
  • Be Informed: Stay informed about regulatory changes that may affect loan charges.

Personal Loan EMI Calculator

In a nutshell, your this EMI calculator considers just 3 things - your loan amount, the duration for which the loan has been taken, and the interest rate you're required to pay on this loan.

An EMI or an 'Equated Monthly Installment' is your loan payment broken down into instalments. It's taking money on rent from a lender. Each EMI payment combines the principal amount with the interest amount. At the start of your EMI payments, a major chunk of your EMI amount is just the interest you owe the bank.

Explore the Personal Loan EMI Calculator here. This is a snippet of what it looks like:

A screen grab of Personal Loan EMI Calculator.

The exciting thing about this? As you keep paying off your EMIs, the interest component keeps reducing. And after a point, you're only paying off the principal. This happens because your principal amount keeps decreasing with each repayment.

This is the formula used:

EMI = 

P × r × (1 + r)n/((1 + r)n - 1) 

[where P= Loan amount, r= interest rate, n=tenure in number of months]

Note that - there's also a chance that your EMI amounts change if the bank or lender revises their interest rates. 


Charges are part and parcel of any loan (personal or otherwise) you take from a lender. Consequently, you must check these while making a budget for the loan you wish to take & ensure it's a viable option. 

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Frequently Asked Questions 

1. What are the charges typically associated with personal loans?

Standard charges and fees associated with personal loans may include a processing fee, prepayment charges, late payment fees, EMI bounce charges, and interest on the loan amount. These fees can vary among lenders and should be carefully reviewed in the loan agreement.

2. How do lenders calculate processing fees, and are they typically flat rates or percentages of the loan amount?

The processing fee is a percentage of the total loan amount. Usually, it is 2.5% of the total amount of your loan.

3. What factors might influence the total processing fees charged by lenders?

Factors influencing total processing fees charged by lenders include:

  • Loan Amount: Higher loan amounts may result in higher processing fees.
  • Lender Policies: Different lenders have varying fee structures and policies.
  • Credit Score: Applicants with lower credit scores may face higher fees.
  • Loan Tenure: Longer loan tenures can lead to increased processing fees.
  • Relationship with the Lender: Existing customers may receive preferential rates.
  • Market Competition: Market conditions and competition among lenders can affect fees.
  • Type of Loan: The nature of the loan, whether personal, home, or auto, can impact fees.

4. Are there specific laws or regulations that govern how personal loan fees are disclosed to borrowers?

Yes, in India, personal loan fees are regulated by the Reserve Bank of India (RBI) and the National Housing Bank (NHB) for housing finance companies. Lenders are required to adhere to the Fair Practices Code, which mandates transparency in disclosing all fees to borrowers. Additionally, the Consumer Protection Act 2019 has provisions for consumer protection and requires lenders to provide clear and detailed information about loan terms and charges. These regulations aim to protect borrowers and ensure they have access to complete and accurate information about the fees associated with personal loans. 


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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