1. APR expresses regular borrowing cost on an annualised basis

Under RBI's applicable KFS framework, APR combines the interest rate with certain other all-in charges so borrowers can compare covered loan offers more meaningfully.

Tip: APR is broader than the nominal interest rate.

2. Contingent penalties are different

Default-related penal or late charges are not the same as the regular all-in borrowing cost. APR should not be read as the maximum possible cost under every bad repayment scenario.

Note: Know what is included and excluded.

3. APR exposes high upfront fees

Two loans can advertise the same rate while one deducts a much larger fee, leaving you with less net cash for similar repayment. APR and net disbursal make that difference easier to see.

Tip: Compare how much you receive versus how much you repay.

4. APR is not the only decision factor

Also compare EMI affordability, rate type, tenure, collateral risk, prepayment flexibility and lender quality.

Tip: Use APR as a strong comparison tool, not the entire decision.

5. Quick check

Same nominal rate, but one loan has much higher mandatory fees. Which measure may reveal the difference better?