Don’t know what a loan processing fee is or how much it could cost? We cover all the basics of loan fees, plus helpful tips on minimizing them. Find out more now!

Loan processing fees can add up quickly if you don’t know what you’re looking for. Learning the basics of loan fees and how to minimize their costs is essential in order to save time and money. Find out everything you need to know about loan processing fees right here!
Understand Loan Processing Fees.
Loan processing fees are generally charged by lenders to cover the costs associated with assessing a loan application. Commonly loan processing fees include a credit check, appraisal fee, administrative and attorney’s fees.
Banks charge these fees as per the type of loans. Some loans and advances such as loans under special salary packages are waived of processing fee. You may find personal loans for defence personnel are free from it. Moreover, these fees are waived from time to time as per the bank requirement.
When bank has surplus funds they need to lend it so to earn profit from the common like us. There are other factors such as market demand, increase and decrease in FD rates and RBI’s monitory policies may also linked indirectly to the fees and charges banks incur from its customers.
Loans such as car/auto loan, home loan, business loan are not waived in most of the bank. They are charged in the range of 1 to 4 percent of the sanctioned amount. If it is charged at minimum 1 percent, when you get a personal loan of ₹ 10 lacs, you may pay ₹ 10000 to the bank as processing fee for loans. Adding GST the amount may become a bit increased.
Knowing about how much you are going to pay is important. Most people do not even consider it as important but in reality a good chunk of amount is going to go away.
In order to avoid any surprise charges down the line, it’s important to carefully read through all loan details beforehand and make sure you fully understand any terms and conditions.
Here are some of the tips that you can use to minimize your loan processing fee.
1 | Processing fees are normally negotiable. The bank gives offer to it’s loyal customers who has good business with them. |
2 | Look out for seasonal offers. From time to time bank waives processing fees during the festive seasons. Personal loans, home loans and car loans are to look out during these days. |
3 | Don’t let the bad debts cripple your credit score. It’s good to have a strong credit score so that your bank consider you one of thier creditworthy clients. |
4 | Compare offers between banks, it may gives you the best one. Also, avail loans which has no processing fee. Examples are loan against FDs and securities, consumer loans etc. |
5 | Use Bank accounts which are waived with loan processing fee. Special types of account such as Bank account for defence personnel are waived of these fees. |
Knowing your lender’s policy on loan processing fees can help you save money in the long run. Let’s see what are the things that you need to consider so to understand it in an easy way.
Consider All of Your Lender Options.
When applying for a loan, be sure to consider all of your lender options before you sign any contracts. Shopping around is important in order to find the right loan that fits in both your budget and needs. You may get better offers in prominent banks such as State Bank of India, ICICI, HDFC bank ltd and few other public sector undertaking banks.
Be sure to compare processing fees at multiple lenders as they may vary wildly, depending on the lender and type of loan you’re applying for. By taking the time to do your research, you can minimize extra costs and make sure you’re getting the best deal on your loan.
Negotiate for a Lower Loan Processing Fee.
Many people don’t realize that loan processing fees are often negotiable. Before you sign a loan agreement, take the time to speak with your lender and see if they can give you a lower rate.
By asking for a discount on the processing fee, you might be able to save extra money that could be used to pay down your loan principal more quickly.
It’s always a good idea to compare different lenders and negotiate as much as possible before signing any contracts. Moreover, see for seasonal offers that banks give. During festive seasons, banks usually give offers and deals which are quite attractive.
You may also see in their advertisement of slashing processing fees to Zero Processing Fees. That’s the best time to grab the opportunity to buy cars, houses and things that you need.
Analyze the Impact of Early Repayment on Loan Fees.
Analyzing the impact of early repayment will not reduce the processing fee but knowing how much loan fees cost is only half the battle.
It’s also important to analyze the impact on your income due to the overall cost of your loan. Reducing these cost will indirectly affects the processing fee as it would decrease the overall cost.
Consider if prepaying a loan will help you pay less in other fees if you choose to refinance or repay your loan earlier than expected. Many lenders offer an additional incentive for making early payments and this can be used as leverage when negotiating for better terms.
Knowing the different implications can help you save money in the long run which indirectly correspond to the processing fee.
Seek Professional Advice When Appropriate.
If you’re in a situation where the loan fees seem too high or there is no way to avoid paying them, it might be wise to seek professional advice.
A financial planner or accountant can help guide you by assessing the details of your particular loan and recommend options for how to minimize the fees associated with it.
Investment is one good options that help you recover the charges and fees paid toward loan repayment including the interest that you pay.
They may also be able to provide insight on additional costs that could come up when acquiring a loan and what steps you can take to protect yourself from any potential hazards along the way.