The processing fee raises the overall cost of borrowing beyond the stated interest rate. The annual percentage rate (APR) expresses the annualised cost of a loan, accounting for interest and applicable charges. It therefore provides a broader basis for comparing loan offers than the nominal interest rate alone.
The amount you receive also affects this comparison. When the processing fee is deducted from the disbursal, you receive less than the sanctioned loan amount but repay EMIs calculated on the full principal. The APR in your KFS helps account for this difference, subject to the applicable calculation method and fee treatment.
Worked example: Farida in Hyderabad
Farida is 41 and works as a salaried hospital administrator in Hyderabad. She earns Rs. 85,000 per month and has a CIBIL score of 768. She needs Rs. 3.6 lakh for her son's college admission and considers a personal loan at an illustrative interest rate of 14.5% per annum.
Before choosing a repayment tenure, Farida compares the monthly EMI and total interest over 36 and 48 months. She also accounts for the processing fee to understand how much the loan will cost beyond the stated interest rate.
EMI formula: EMI = P × R × (1 + R)^N ÷ [(1 + R)^N − 1]
Here, P is the loan principal in rupees, R is the monthly interest rate expressed as a decimal, and N is the repayment tenure in months. For an annual interest rate of 14.5%, R is 14.5 ÷ 12 ÷ 100. The formula calculates equal monthly instalments covering principal and interest. The interest component is higher in the earlier instalments and declines as the outstanding principal reduces. All figures are rounded to the nearest rupee.
| Tenure | Monthly EMI (Rs.) | Total interest (Rs.) | EMI as a share of monthly salary |
|---|
| 36 months (3 years) | 12,392 | 86,096 | 14.6% |
| 48 months (4 years) | 9,928 | 1,16,547 | 11.7% |
Last reviewed: 16th October 2026
The 48-month tenure reduces Farida's monthly EMI by Rs. 2,464 but adds Rs. 30,451 in total interest. The processing fee remains unchanged because the principal is the same under both options.
At the maximum processing fee of 4.13%, Farida pays Rs. 14,868 in fees on the Rs. 3.6 lakh loan. If the fee is deducted from the disbursal, she receives Rs. 3,45,132 while repaying EMIs calculated on the full principal.
The draft calculation puts the APR for the 36-month option at 17.50%. This figure must be verified against the lender's applicable APR calculation method and fee collection terms before publication. Farida should use the APR stated in her KFS to compare the full borrowing cost.
Farida chooses the 36-month tenure in this illustration because it balances the monthly commitment against the additional interest associated with a longer repayment period. The final choice should also account for her existing EMIs, essential expenses and the total cost stated in the loan offer.
What can delay approval? A CIBIL score below 650 or existing EMIs that take up a large share of your income can affect the lender's assessment. Inconsistent names or addresses across documents can also delay verification. Submitting multiple loan applications within a short period can affect the assessment process as well.
Checking the processing fee on your offer? With a Bajaj Finance Personal Loan, you can borrow Rs. 40,000 to Rs. 75 lakh, subject to eligibility. Check your loan offer with your phone number and a one-time password (OTP) → apply online in about 5 minutes → receive funds within 24 hours* of approval.
