The short answer
Beyond interest, expect a processing fee of 0.5% to 3%, and on a property loan another ₹10,000 to ₹35,000 in valuation and legal charges plus mortgage stamp duty. Foreclosure charges of 2% to 5% apply to most business and fixed-rate loans, but generally not to floating-rate loans to individuals.
Charges you will meet
| Charge | Typical | Notes |
|---|---|---|
| Processing fee | 0.5% – 3% | Up to 5% on some unsecured business loans. Often deducted from disbursement. |
| Valuation | ₹3,000 – ₹15,000 | Property loans. Larger loans may need two valuations. |
| Legal opinion | ₹5,000 – ₹20,000 | Property loans. |
| Mortgage stamp duty & registration | Varies by state | On a large loan this is often the biggest single charge. Ask early. |
| Foreclosure / prepayment | 2% – 5% | Common on business, personal and fixed-rate loans. Generally nil on floating-rate loans to individuals. |
| Penal interest | Substantial | On late payment. Set up an auto-debit. |
| Cheque or mandate bounce | ₹500 – ₹1,500 | Per instance, plus the credit report entry. |
| Insurance | Varies | Property insurance is usually required. Loan protection cover is usually optional — ask. |
The one to watch: fee deducted from disbursement
If you borrow ₹30 lakh with a 2% processing fee deducted upfront, ₹29.4 lakh reaches you — but you pay interest on the full ₹30 lakh for the whole tenure. Your effective cost is meaningfully above the headline rate.
Always ask what will actually be credited to your account, not what the sanction says.
What is negotiable
More than people assume, particularly at sanction stage:
- Processing fee. Frequently reduced or waived, especially on larger loans or if you have an existing relationship.
- Foreclosure charges. Worth raising before signing rather than discovering later.
- Bundled insurance. If it is optional, you may decline it. Ask explicitly whether it is a condition.
What is rarely negotiable: stamp duty, statutory charges, and the valuation and legal fees, which go to third parties.
Compare the total, not the rate
A 17% loan with a 1% fee and no foreclosure charge is usually better than a 16.5% loan with a 3% fee and a 4% foreclosure charge. Ask every lender for the full schedule of charges in writing, and compare what you actually pay rather than the number in the advertisement.
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