Why do lenders impose loan processing fees?
Lenders impose loan processing fees to cover administrative costs involved in evaluating, approving, and disbursing loans. These fees help offset expenses related to paperwork, credit checks, and processing the application. Lenders also use these fees to mitigate risks associated with lending, ensuring a sustainable and profitable lending operation.
Thus, knowing the personal loan processing fees is crucial to getting funds instantly. It also helps estimate the annual percentage rate (APR), including personal loan interest rates and miscellaneous charges.
Learn more about processing charges for personal loans from the sections below!
Processing loan processing fees and charges
Lenders impose standard processing fees across financial products, including personal loans. Usually, the personal loan processing fees can range up to 3.93% of the sanctioned amount, depending on the lender and applicants’ credit profile.
Lenders levy this charge to cover the cost incurred while processing the loan. However, in some instances, lenders can waive off these charges entirely or partially. It includes the following:
- During festive offers
- For individuals with higher CIBIL scores or better eligibility
Besides the processing fees for a personal loan, one also needs to bear other charges as and when applicable.
Common charges and processing fees for a personal loan
Following are the different types of charges applicable on a personal loan:
1. Bounce charges
While repaying a loan, if the EMI bounces, borrowers need to pay bounce charges alongside late payment penalties. It incurs when the cheque, NACH, or ECS mandate fails to clear. The cost ranges from Rs. 700 to Rs. 1,200 per bounce.
2. Penal interest charges
Lenders impose this fee when one fails to pay the EMI on time. The penal interest will be applicable at 3.50% per month on the EMI outstanding.
3. Document charges
Downloading loan documents like letters, certificates and e-statements online from the website does not attract any charges. However, to obtain a physical copy, one needs to pay nominal charges.
Additional read: What is personal loan NOC?
4. Part-prepayment charges
Existing borrowers can also make part-prepayment by paying nominal charges on the amount repaid. Note that the part-prepayment amount should be more than one EMI. Additionally, part-prepayment charges are not applicable on loans availed at a floating interest rate.
5. Foreclosure charges
Besides part-prepayment, borrowers also need to pay foreclosure charges on the principal outstanding. With this facility, individuals can repay the loan dues at a time before the tenure ends. It helps boost the credit score as a reward for clearing debts faster.
6. Maintenance charges
Like personal loan processing fees, individuals may also need to pay additional maintenance charges on the withdrawn amount of a Flexi Personal Loan.
Processing fees and charges on Bajaj Finance Personal Loan
Bajaj Finserv extends one of the lowest processing fees for a personal loan that helps keep the borrowing costs under check. Besides reduced processing fees, it also imposes nominal additional charges and competitive interest rates on a personal loan.
Individuals can resort to a personal loan EMI calculator to compute the monthly liabilities and total interest payable at the end of the tenure.
Therefore, knowing the types of fees involved with a personal loan will make it easier for applicants to estimate the amount payable while borrowing.
Read More: Differences between flat and reducing interest rate
Frequently asked questions
Processing fees for loans are typically calculated as a percentage of the loan amount. Lenders charge this fee to cover the costs associated with processing the loan application. The specific percentage can vary among lenders and may be influenced by factors such as the loan amount, applicant's creditworthiness, and the type of loan.
The loan processing fee is typically paid by the borrower. Lenders charge this fee to cover the costs associated with processing and approving a loan application. It is a one-time payment made by the borrower as part of the overall cost of obtaining the loan.
Avoiding processing fees in a personal loan may be challenging, as it is a standard charge by lenders to cover administrative costs. It's advisable to explore loan options, negotiate terms, and inquire about any potential fee waivers or discounts.
Processing fees for loans are common. Many lenders charge processing fees to cover administrative costs. Borrowers should carefully review loan terms and choose options that align with their financial preferences and needs, considering both fees and interest rates.
