Why the lowest rate isn't always the cheapest loan
Loan offers differ in more than the interest rate. Processing fees, the tenure, and whether the rate is fixed or floating all change what you really pay. A loan with a slightly lower rate but a hefty processing fee can cost more overall, especially on shorter tenures. This calculator adds 18% GST to processing fees, because that's what you'll actually be charged.
Worked example
Total cost = (EMI × months − loan amount) + fee × 1.18A checklist before you sign
- Same tenure: compare offers at the same tenure first. A longer tenure always shows a lower EMI and a higher total cost.
- Fixed or floating: a floating rate can rise later. A fixed rate gives certainty but often costs more.
- Prepayment and foreclosure charges: important if you expect to repay early.
- Insurance bundling: some lenders add loan protection insurance to the loan amount. It's optional, and adding it increases your EMI.
- Flat vs reducing rate: if one offer quotes a flat rate, convert it with the flat vs reducing calculator before comparing.
Every lender must give you a Key Fact Statement (KFS) showing the annual percentage rate (APR), which includes fees. Ask for it, and compare APRs as well as the numbers here.
Negotiating a better offer
Lenders expect you to compare. With a written offer from one bank, ask the other to match or beat it, both the rate and the processing fee. A good credit score (750+), a salary account with the bank or a larger down payment are all bargaining chips. Even a 0.25% cut on a large, long loan is worth a phone call.
Frequently asked questions
What is APR on a loan?
The annual percentage rate includes interest and most fees, expressed as one yearly rate. Lenders in India must show it in the Key Fact Statement.
Is the processing fee refundable?
Usually not, even if you cancel the loan later. Negotiate it before you accept the offer.
Should I take a longer tenure to lower the EMI?
Only if the lower EMI is necessary. You'll pay more interest, though you can reduce that later by prepaying.