Compare loan offers the right way
Two loan offers with the same headline rate can cost very different amounts once processing fees, GST on fees, legal and valuation charges and tenure differences are considered. This tool lets you enter up to four offers and see the EMI, upfront cost, total interest, total cost of credit and effective APR side by side, with the best value in each row marked.
What is effective APR?
Annual Percentage Rate is the true annual cost of the loan, calculated as the internal rate of return (IRR) of the actual cash flows: you receive the loan minus all upfront charges and then pay the EMIs. RBI requires every lender to disclose APR in the Key Fact Statement for retail loans precisely so borrowers can compare offers on one number.
Worked example
Bank A: ₹25 lakh at 8.50% for 20 years, processing fee 0.5% + GST. Bank B: ₹25 lakh at 8.35%, flat fee ₹10,000 + GST and ₹5,000 other charges. Bank A's EMI is ₹21,696 and Bank B's ₹21,459. Over 20 years Bank B saves about ₹57,000 in interest and its upfront cost is slightly lower too, so it wins on total cost and APR despite looking similar at first glance.
Charges to include
- Processing fee (percentage or fixed) — 18% GST applies on top.
- Legal and technical valuation fees for home loans.
- Loan insurance premium if the lender insists on it.
- Stamp duty on the loan agreement and CERSAI charges.
When total cost can mislead
Total cost is meaningful only when the loan amounts and tenures are comparable. If one lender sanctions a different amount or tenure, compare the APR column instead, which normalises for both. Also weigh non-financial factors: floating-rate benchmark (repo vs MCLR), reset frequency, prepayment flexibility, top-up facility and service quality.
Frequently Asked Questions
Why is the APR higher than the interest rate?
Because APR includes processing fee, GST and other upfront charges, spreading them over the loan tenure. The shorter the tenure, the more these charges push up APR.
Which is better — a lower rate with a high fee or a slightly higher rate with no fee?
It depends on tenure. For long tenures a lower rate usually wins; for short tenures the fee matters more. The total cost and APR columns settle it.
Should I include loan insurance in the comparison?
Yes if the lender makes it mandatory or bundles it into the loan. Optional insurance can be bought separately, often cheaper.
Are my entries saved?
Yes, offers are stored in your browser only, so you can come back and edit them. Use Reset to start fresh.
Disclaimer: This tool is for general information and estimation only. Tax rates and rules change — verify with official sources or a professional before acting. Read full disclaimer.