A ₹10 lakh sanction with a 2% fee puts about ₹9.76 lakh in your account — and you repay interest on the full ₹10 lakh. Here is every charge on a personal loan, and which of them you can actually get moved.
The fee is deducted before the money reaches you, but the EMI is calculated on the amount before deduction. That gap is the most misunderstood thing about a personal loan — and it is one of the few numbers a lender will genuinely move if you ask.
The fee is a percentage of the sanctioned amount, plus 18% GST on the fee itself. It is not billed to you — it is deducted from the disbursal, so the sum credited to your account is smaller than the sum on your loan agreement.
What surprises people is the other half: your EMI is calculated on the sanctioned amount, not the disbursed one. On a ₹10 lakh sanction at a 2% fee, ₹9,76,400 reaches you and you pay interest on ₹10,00,000 for the whole tenure. The effective cost of the loan is therefore higher than the quoted rate — by roughly half a percentage point on a five-year term at these numbers.
This is why comparing two offers on rate alone is unreliable. A loan at 12.5% with a 1% fee can cost less over five years than one at 12% with a 3% fee, even though the second looks cheaper in the advertisement.
Did you know?
If you need a specific amount in hand — say ₹5 lakh for a medical bill — asking for a ₹5 lakh loan will leave you short. At a 2% fee plus GST you would receive about ₹4,88,200. To actually receive ₹5 lakh you need to apply for roughly ₹5.12 lakh. Applicants discover this at disbursal, when the shortfall is awkward to fix.
| Charge | Typical level | When it applies |
|---|---|---|
| Processing fee | 1% – 3% + GST | Deducted from the disbursal |
| Foreclosure / prepayment | 2% – 4% of outstanding | Closing a fixed-rate loan early |
| Part-prepayment charge | 2% – 3% of the amount paid | Paying a lump sum mid-term |
| EMI bounce charge | ₹500 – ₹750 + GST | Each failed auto-debit |
| Late payment interest | 2% – 3% per month on the overdue | Payment after the due date |
| Loan cancellation | ₹1,000 – ₹5,000 plus interest accrued | Cancelling after disbursal |
| Duplicate statement / NOC | ₹200 – ₹500 | On request |
| Stamp duty | As per state | On the loan agreement |
Two of these matter far more than the rest. The processing fee, because it is charged on every loan; and the foreclosure charge, because personal loans are closed early far more often than people expect when they sign.
The processing fee is the most negotiable number in the whole agreement. It is a one-time charge the lender controls entirely, and waiving it costs them less than losing the file. A strong applicant asking directly gets it reduced or waived surprisingly often — festive offers aside, it is worth asking in any month.
The rate moves, but less. Half a percentage point is achievable with a competing offer in hand; more than that usually is not.
Foreclosure terms are rarely negotiable but they are comparable — lenders differ, and choosing one with a low or nil charge at the outset is far easier than arguing about it later.
Bounce charges and late fees are not negotiable and are also reported to the credit bureaus, which makes them expensive twice over.
Expert insight
Ask for the fee waiver at the right moment, which is after you have a sanction letter and before you accept it. Before sanction you have no leverage and the answer is a scripted no; after disbursal the money is gone. In that narrow window the lender has already spent the cost of underwriting your file and stands to lose it — which is precisely when a ₹20,000 fee becomes discussable. Asking with a competing sanction letter in hand works better still.
Many lenders bundle a credit-life insurance premium into the loan. It is presented as protection for your family, and sometimes it genuinely is — but it is frequently added to the principal rather than paid separately, which means you pay interest on the premium for the entire tenure.
On a ₹10 lakh loan a bundled premium of ₹25,000 to ₹40,000 is common. Financed at 13% over five years, that premium costs roughly ₹9,000 more in interest on top of itself.
Ask two questions before signing: is it optional, and can I pay it separately rather than adding it to the loan? A yes to either saves real money, and in most cases the cover is optional whatever the impression given.
Ignore the advertised rate and work out the total outflow: EMI × tenure, plus the fee and GST, plus any bundled premium. Then compare that single number across offers. The EMI calculator includes a processing-fee field for exactly this reason, and will show you what actually reaches your account.
If you expect to close the loan early, add the foreclosure charge to the comparison — on a fixed-rate loan it can be the largest single cost of the lot, as the fixed versus floating page explains.
Please note
All charge levels above are indicative ranges and vary by lender, product and applicant profile; fees, GST treatment and regulations change without notice. Your own sanction letter and schedule of charges are the authority. Nothing here is financial advice or a guarantee of any fee or waiver.
Q1. How much is the processing fee on a personal loan?
Commonly 1% to 3% of the sanctioned amount, plus 18% GST on the fee. On ₹10 lakh at 2% that is ₹23,600.
Q2. Is the fee paid upfront or deducted?
Deducted from the disbursal in almost every case. You never pay it separately, but you also never receive that portion of the loan.
Q3. Do I pay interest on the processing fee?
Effectively yes. The EMI is calculated on the sanctioned amount, not the smaller amount credited to you.
Q4. Can the processing fee be waived?
Often, yes. It is the most negotiable item in the agreement. Ask after the sanction letter is issued and before you accept it, ideally with a competing offer in hand.
Q5. What is the foreclosure charge?
Typically 2% to 4% of the outstanding on a fixed-rate loan. Floating-rate loans taken by individuals for non-business purposes cannot be charged for foreclosure.
Q6. How much do I lose if my EMI bounces?
₹500 to ₹750 plus GST from the lender, possibly a return charge from your bank, and a mark on your credit report — which is the costliest part.
Q7. Is loan insurance compulsory?
Usually not, whatever impression is given. Ask whether it is optional, and if you want the cover, ask to pay the premium separately rather than adding it to the principal.
Q8. I need exactly ₹5 lakh in hand. How much should I apply for?
Around ₹5.12 lakh at a 2% fee plus GST. Applying for ₹5 lakh would leave about ₹4.88 lakh in your account.
The rate gets all the attention and the fees quietly decide which offer was actually cheaper. Work out the total outflow on each offer, apply for slightly more than you need so the deduction does not leave you short, and check whether an insurance premium has been folded into the principal.
Then ask for the processing fee to be waived, in the window between sanction and acceptance. It is one request, it takes a minute, and on a large loan it is worth more than any rate negotiation you are likely to win. The wider picture on pricing is on the interest rates page, and what your profile is worth on the CIBIL score page.
Money Bharti matches your profile against 100+ RBI-registered banks and NBFCs with a soft enquiry — nothing recorded against your CIBIL score, and comparing is free.
Check my eligibilityGet a free, no-obligation eligibility check and compare real offers from 20+ RBI-regulated Banks & NBFCs — with zero impact on your credit score.
🚀 Check Your Eligibility — Free