Why Loan Processing Fee?

Valuable financial tools like loans help meet expenses. However, the total loan cost includes some costs other than the interest rate. Loan companies add some fees on top of the principal and interest amount, including the loan processing fee. Figuring out the processing fee prepares the borrower for the upcoming costs involved. Let’s discuss what a processing fee is and why do lenders charge it.

What is the Loan Processing Fee?

When you apply for a loan, the lending institution levies a one-time charge on different types of credit products. This is called processing fee. It can be deductible from the loan amount, or you may pay it separately. Usually, it is a small percentage of the principal amount you borrow. 

Loan companies charge processing fee to cover costs such as documentation, verification, agreement, etc. It is a one-time, non-returnable fee that some loan providers may waive as part of their special offers.

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Reasons to Impose Loan Processing Fee

Lending institutions charge loan processing fees to cover various costs they must incur to approve the loan. These include the following:

  • Document verification charges
  • Pre-sanction inspection charges
  • Vetting charges
  • Post-inspection charges
  • Advocate charges for a legal opinion
  • Valuation charges for secured loans 
  • Credit bureau report charges
  • CERSAI charges
  • ITR verification charges

What can be the Maximum Processing Fee?

Lenders have a specific range within which they can charge the processing fee. According to the rules, the lending institution must disclose all expenses associated with the Personal Loan without any discrimination. At Hero FinCorp, the processing fee is approx. 2.5% plus taxes. 

Before applying, read the loan document and check the processing fee the lender is charging. It will make you aware of the charges applicable. The processing cost is usually a one-time fee.

Options to Pay the Processing Fee

Loan companies may levy processing fees in different forms. While some deduct them from the loan disbursal, others require payment separately. Check the fees of different loan providers to find the best deal that saves money.

A loan processing fee is a nominal charge lending institutions levy for processing loan applications. It aims to cover several expenses related to processing loans, including documentation, agreement, verification, credit check, etc. If you are ready to apply for a loan, check the processing fee to avoid any unpleasant surprises.

Disclaimer: The information provided in this blog post is intended for informational purposes only. The content is based on research and opinions available at the time of writing. While we strive to ensure accuracy, we do not claim to be exhaustive or definitive. Readers are advised to independently verify any details mentioned here, such as specifications, features, and availability, before making any decisions. Hero FinCorp does not take responsibility for any discrepancies, inaccuracies, or changes that may occur after the publication of this blog. The choice to rely on the information presented herein is at the reader's discretion, and we recommend consulting official sources and experts for the most up-to-date and accurate information about the featured products.

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Written by  Katyaini Kotiyal

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Katyaini is a finance expert with a focus on the non-banking financial sector, bringing over 8 years of experience in NBFC. She specializes in simplifying complex financial concepts for readers, helping them navigate the NBFC landscape. Outside of work, she is passionate about travelling.

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CORPORATE OFFICE

09, Basant Lok, Vasant Vihar, New Delhi - 110057
Tel. +91-11-49487150
Fax. +91-11-49487197, +91-11-49487198


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