A processing fee is a one-time charge that a bank or lender collects when you apply for a loan, meant to cover the administrative cost of evaluating your application, verifying your documents and income, and formally sanctioning the loan. It's usually calculated as a percentage of your loan amount, subject to a minimum and sometimes a maximum cap.
This fee is generally non-refundable, even if your loan application is eventually rejected after the fee has been paid, so it's worth clarifying this upfront. Since processing fees can vary noticeably between lenders, and are sometimes negotiable, it's worth factoring this cost into your comparison when shopping around for a loan, rather than looking only at the headline interest rate, since a lower rate with a high processing fee might not actually be the cheaper overall option.