1. The headline rate is only one cost

Processing, documentation, verification, legal, valuation, stamp or other product-specific charges can apply. Taxes can apply to fees where required.

Tip: The sanctioned amount can differ from net cash received.

2. The Key Facts Statement is designed to make cost visible

For applicable retail and MSME term loans, RBI's KFS framework standardises important disclosures including APR and certain charges. Read it before acceptance and compare it with the sanction terms.

Tip: The KFS is one of the most useful loan documents.

3. Penal charges are different from normal interest

RBI's current framework distinguishes covered penalties for borrower non-compliance from the normal contractual interest rate. Do not mix late/default charges into the advertised lending rate.

Note: Default-related charges are not ordinary pricing.

4. Asset-specific loans can have asset-specific costs

Home loans can involve legal and technical checks; vehicle loans involve hypothecation-related processes; gold loans involve valuation and custody. Build a complete cost sheet.

Tip: If a fee cannot be explained clearly, do not ignore it.

5. Quick check

A ₹5 lakh loan deducts ₹10,000 processing fee before disbursal. What should you compare?