Why Lower Processing Fees Make Personal Loans More Affordable

Personal loans are practical and flexible; they can be used for various needs like medical expenses, emergencies, paying existing dues, travel, etc. They are unsecured loans, which means banks do not need collateral to approve them. They offer quick access to funds, but banks charge a processing fee to approve and disburse them.  

Typically, all lenders charge a mandatory processing fee upfront; only a select few borrowers have this fee waived off or get offered a low-processing fee for their personal loan. There is a special eligibility criterion to get selected for it. Let us see in detail what they are.  

What is a Processing Fee in a Personal Loan? 

When banks process any loan application, they levy an upfront charge called the processing fee to cover the costs of assessment, document underwriting, and disbursal. 

In case of a FIRSTmoney personal loan by IDFC FIRST Bank, it starts as low as 1.5% of the entire loan amount. A unique feature of FIRSTmoney is that the processing fee is not deducted from the loan amount. In case of most other lenders, the fee is deducted from your loan amount, reducing the actual amount disbursed to your bank account. 

Why Lenders Waive Processing Fees for Some Borrowers 

Lenders do not waive the processing fee randomly. This valuable facility is offered to borrowers whom the bank deems as low risk and high value. This cost waiver helps the banks to attract and retain borrowers who have a strong credit profile and a robust repayment history. 

Who Qualifies for Low-Processing Fee Loans 

All banks have specific low processing personal loan eligibility, but some common ones are: 

Salaried individuals with consistent earnings.        

Long-standing employment in the same company. 

Existing customers of the bank.  

Borrowers with a high credit score. 

Applicants who have a low debt-to-income ratio. 

A strong debt repayment history. 

Essentially, banks are looking for borrowers who have a minimum risk of defaulting on the loan.  The ultimate decision, however, depends on the lender’s policies.

How Personal Loan Eligibility Plays a Key Role 

Personal loan eligibility has a strong impact on processing fee waivers. Banks evaluate borrowers on several critical factors like age, employment profile, income consistency, credit score and repayment capacity before approving offline or online personal loans. 

Applicants who have higher eligibility thresholds get better offers from banks in terms of higher loan amounts, flexible tenures, better interest rates and fee waivers. Applicants who minimally meet the eligibility criteria can get approvals, but without the additional benefits.  

IDFC FIRST Bank has a clear personal loan eligibility criteria for their FIRSTmoney personal loan, helping applicants understand where they stand before applying.  

Why Credit Score Matters More Than Most People Realise 

A credit score is one of the most critical indicators of an applicant's credit repayment behaviour. A higher score is perceived as low risk by banks since it reflects financial discipline. Higher credit scores not only get faster approvals but may also help the applicant get better interest rates or a low processing fee on loans.  

Why Not Everyone Gets This Benefit 

Low-processing-fee loans are offered only to financially responsible applicants. Banks thoroughly evaluate them on several factors before offering them additional benefits.  

Borrowers with a lower credit score are deemed riskier in terms of loan default; therefore, banks ensure that they recover all loan costs from the onset.  

How to Improve Your Chances of Qualifying 

Borrowers can improve their chances of securing better loan terms by: 

Maintaining a credit score over 750 

Having a minimal debt-to-income ratio 

By avoiding overborrowing  

Having proof of a stable and consistent income        

Running personal loan eligibility checks before applying  

Low-processing fee personal loans are benefits offered to existing bank customers with a strong credit profile as a reward for maintaining strong financial discipline. While not all applicants qualify, a select few can reap the benefits. 

With proper planning and financial management, customers can improve their credit profile and qualify for bank rewards in the future.  

Published on: Thursday, February 12, 2026, 04:19 AM IST