Interest is the biggest line, not the only one. Two offers a percentage point apart routinely swap places once every charge is counted — and the one that decides whether you can refinance later costs nothing to negotiate today.
Last reviewed · Money Bharti is a loan marketplace, not a lender
Interest is the largest line, not the only one. Two offers a percentage point apart routinely change places once every charge is counted — and one charge that costs nothing to negotiate today decides whether you can ever refinance.
| Charge | Typical | What it is |
|---|---|---|
| Processing fee | 1 – 3% + GST | Underwriting and administration, deducted from disbursal |
| Documentation charges | Small, fixed | Agreement preparation and execution |
| Stamp duty | State-dependent | On the loan agreement; can be substantial on large secured loans |
| Legal and valuation | Actuals | Secured loans only — title search, valuer's report |
| CGTMSE guarantee fee | Annual % | Where the facility carries guarantee cover |
| Foreclosure / prepayment | 2 – 5% | On the outstanding, often with a lock-in period |
| Part-payment charge | Varies | On partial prepayments, where allowed at all |
| Late payment penalty | 2 – 3% a month | On the overdue instalment |
| Cheque or mandate bounce | Fixed, per instance | Plus your own bank's charge separately |
| Annual renewal fee | Varies | On overdraft and cash credit limits, every year |
| Insurance premium | Varies | Sometimes bundled — ask whether it is genuinely optional |
The processing fee is charged on the sanctioned amount and deducted from what is paid out — but the EMI is calculated on the full sanction. On a ₹25 lakh loan at 2% plus GST, about ₹59,000 never reaches you, and you repay interest on it for the whole tenure.
On a short tenure this matters more than the headline rate. A 2% fee spread over eighteen months is a much bigger effective addition than the same fee over five years, which is why two offers should always be compared in total rupees over the actual tenure rather than by rate alone. The EMI calculator shows both figures.
Foreclosure terms decide whether today's loan can be replaced by a better one in two years — after a stronger ITR, an improved CMR, or a fall in rates. A 4% charge with an eighteen-month lock-in can wipe out the entire benefit of refinancing.
It costs nothing to negotiate this at sanction stage, when the lender wants your business. It cannot be negotiated afterwards. If you take one thing from this page, make it this.
Ask for the sanction letter before you accept
Every charge should be listed in the sanction letter and the key facts statement. A verbal assurance that "there is no foreclosure charge" is worth nothing once the agreement says otherwise. Ask for the draft, read the charges schedule with your CA, and get anything agreed written into the document rather than into an email trail.
Negotiable: the processing fee, which carries real discretion, particularly if you are moving an existing banking relationship. Foreclosure terms and lock-in. Bundled insurance, which is often optional in fact if not in presentation. And on secured loans, whether legal and valuation costs are borne by you or absorbed.
Not negotiable: stamp duty, which is statutory. GST at 18% on fees, likewise. Late payment penalties, which no lender waives in advance. And the interest rate itself, without changing something in the file — bring security, a guarantor or a better credit position and it moves; bring persistence alone and it does not.
Q1. Is GST charged on the processing fee?
Yes, at 18% on the fee itself, not on the loan amount. A 2% fee on ₹25 lakh is ₹50,000 plus ₹9,000 GST.
Q2. Can the processing fee be waived?
Reduced more often than waived, and it is the most negotiable number in the offer. Existing relationships and competing written quotes are what move it.
Q3. What is a reasonable foreclosure charge?
2% to 4% of the outstanding is common, sometimes with a six to twelve month lock-in. Some lenders waive it after a period. Negotiate it at sanction — it is the charge that decides whether you can refinance.
Q4. Are there charges on an overdraft I do not use?
Often an annual renewal fee on the limit regardless of usage, and occasionally a commitment charge on the undrawn portion. Ask specifically, because an unused limit can still carry a cost.
Q5. How do I compare two offers properly?
Total rupees over the actual tenure: interest, plus processing fee with GST, plus any guarantee fee, plus expected foreclosure cost if you may refinance. Restate any flat rate as reducing balance first — see interest rates.
Money Bharti sets out interest, processing fee, guarantee fee and foreclosure terms as separate lines across RBI-registered banks and NBFCs, so the cheapest headline rate is not mistaken for the cheapest loan. Soft enquiry only.
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