How do processing fees affect the interest rate of a loan?

Processing fees and interest rates are separate charges in a loan. The processing fee is a onetime fee charged by the lender for processing the loan application, while the interest rate is the amount charged by the lender for borrowing the money.

The processing fee does not directly affect the interest rate of the loan. However, when comparing loan options, it's important to consider the total cost of the loan, which includes both the processing fee and the interest rate. A loan with a lower interest rate may have a higher processing fee, and vice versa.

When calculating the Annual Percentage Rate (APR) of a loan, the processing fee is included along with the interest rate and any other fees associated with the loan. The APR provides a more accurate picture of the true cost of borrowing, as it takes into account all the charges associated with the loan.