Simple Definition
Processing fee is usually charged as a percentage of the loan amount or as a fixed fee. It may be deducted from disbursement or collected separately.
Why It Matters
Processing fee affects the total cost of borrowing and should be compared along with interest rate.
Example
If the processing fee is 1% on a ₹5 lakh loan, the fee may be ₹5,000 plus applicable taxes.
FAQs on Processing Fee
Is processing fee refundable?
Refund rules depend on lender policy and the stage of application.
Does processing fee affect APR?
Yes, processing fee can affect APR because APR reflects broader borrowing cost.