APR calculator: the true yearly cost of your loan

APR (annual percentage rate) is the yearly cost of a loan, including the interest and all other charges. Fees come out of the loan, so you receive less than you borrow but repay EMIs on the full amount. That makes the APR higher than the interest rate. Since 1 October 2024, RBI has required lenders to show it in a Key Facts Statement before you sign. In RBI's own example, a ₹20,000 loan at 15% for 24 months with ₹400 of charges has an APR of 17.07%.

Annual percentage rate (APR) calculator

How APR is calculated: RBI's example

RBI computes the APR on the net disbursed amount, using the IRR approach and the reducing balance method. This calculator does the same: it finds the monthly rate at which your EMIs repay the cash you actually received, and multiplies it by 12. On RBI's example it gives 17.07%, the figure RBI prints.

The rate is 15%, but the true yearly cost is 17.07% because ₹400 never reaches you.

What goes into the APR

• Interest, at the rate in your loan agreement.
• Every charge the lender levies, such as the processing fee.
• Charges collected for third parties, such as insurance and legal charges. RBI says these form part of the APR and must be shown separately. If they can't be known before sanction, the lender may show an upper limit.

Before you sign: your Key Facts Statement

• The lender must give you the KFS before you sign, in a language you understand, and explain it to you.
• No fee that isn't in the KFS can be charged at any stage of the loan without your explicit consent.
• For NBFC loans, the KFS must stay valid for at least three working days (one working day for loans shorter than seven days), so you have time to compare.
• Digital loans have a cooling-off period of at least one day. You can exit by paying back the principal and the proportionate APR, without a penalty. The lender may keep a reasonable one-time processing fee.