Your Loan KFS Is More Important Than the Headline Rate: How to Read It

About this guide

A loan offer can look excellent on a banner and still be expensive once the paperwork arrives. That is why the most useful document in a retail loan is often not the advertisement or the WhatsApp quote. It is the Key Facts Statement, or KFS . The KFS is meant to bring the important numbers into one place before you sign. For borrowers, that is a big improvement because a loan should not be compared only by the interest rate. You also need to know the processing fee, other charges, repayment schedule, penal charges, prepayment terms and the Annual Percentage Rate (APR) — the annualised cost of credit that takes the loan-related charges into account. RBI's framework requires regulated lenders to provide a KFS for retail and MSME term loans in a standardised format, in a language the borrower understands. It must include an APR calculation and repayment schedule. A fee that is not mentioned in the KFS cannot simply be added later without the borrower's explicit consent. Start with APR, not the rate printed in the ad Suppose two lenders both quote an interest rate that looks almost…