Two lenders both offer you a personal loan at 14% a year. Are they the same? Not necessarily. One might charge a 1% processing fee and the other 3%, plus insurance. The interest rate alone doesn't tell you what the loan really costs — the APR does.
Interest rate vs APR
- Interest rate — the price of borrowing the principal, usually on a reducing balance.
- APR (Annual Percentage Rate) — the all-in annual cost, combining interest with fees and charges you must pay to get the loan (such as processing fees). It is the fairest single number for comparing offers.
Because fees are paid upfront while interest is spread over time, a fee has a bigger effect on the APR of a short loan than a long one.
The Key Fact Statement (KFS)
RBI requires banks and NBFCs to give every borrower of a retail or MSME term loan a Key Fact Statement before the loan agreement is signed. It is a standard, easy-to-read summary that includes:
- Loan amount, tenure and the interest rate type (fixed or floating)
- The APR
- All fees and charges, including third-party charges collected by the lender
- The repayment schedule with each instalment
- Penal charges for late payment
- Details of the grievance redressal officer and any cooling-off period
Any charge not in the KFS cannot be levied without your explicit consent.
How to compare two offers
- Ask each lender for the KFS — or a draft — before you commit.
- Compare the APR, not the headline rate.
- Check the total amount payable over the full tenure.
- Read the prepayment terms — especially if you might repay early.
- Check penal charges; they should be a fixed charge, not added to your interest rate.
At Kredistar
We publish the maximum APR and a representative cost example for personal loans on our Rates & Disclosures page, and we walk you through each lender's KFS before you sign. Our service is free — we are paid by the lender, never by you.
This article is for general information only and is not financial, legal or tax advice. Loan terms are set by the lender. Kredistar Finserv Pvt. Ltd. is a DSA and loan aggregator, not a lender.