APR and the Key Fact Statement, explained

The interest rate is not the whole cost of a loan. The APR adds the fees, and the Key Fact Statement (KFS) puts every number in one place before you accept. Here is how to read both, with a calculator that shows how a processing fee raises the APR.

Interest rate vs APR

The interest rate decides your EMI. The annual percentage rate (APR) is the all-in yearly cost: interest plus charges such as the processing fee. A fee is usually taken out of the amount you receive, so you pay interest on money you never got — which is why the APR is higher than the rate.

See how a fee changes the APR

EMI: ₹4,992 · Fee with 18% GST: ₹2,360 · You receive: ₹97,640

Interest rate 18% a year → APR about 20.5% a year

Example figures. APR here is the monthly rate that equates the amount received with the EMIs, times 12. Your lender’s KFS shows the APR for your loan, including any other charges.

What the Key Fact Statement shows

RBI requires lenders to give you a KFS before you accept a loan. Look for:

  • the loan amount and the amount actually paid into your account;
  • the interest rate, every fee and charge, and the APR;
  • the EMI, the number of EMIs and the repayment schedule;
  • penal charges for late payment, and any prepayment or foreclosure charge;
  • the cooling-off (look-up) period and how to exit in it;
  • the lender’s grievance officer and how to complain.

A charge that is not in the KFS cannot be levied without your explicit consent.

Comparing offers

Compare loans on the APR and the total amount repayable, not on the headline rate. Rates listed by amount: personal loan interest rates. Closing a loan early: foreclosure charges.

Applications are made in the Innopay app: choose the amount you need there and see the offers available to you. The lender decides approval.

Apply in the Innopay app

Frequently asked questions

Why is the APR higher than the interest rate?

The APR adds the fees, such as the processing fee, to the interest. A fee taken out of the loan means you receive less but repay EMIs on the full amount, so the yearly cost is higher than the rate.

What is a Key Fact Statement?

A standard summary the lender must give you before you accept: the amount, the amount you receive, the interest rate, every charge, the APR, the EMIs and the cooling-off period.