What the key fact statement says about your bank loan
₹1 lakh loan obtained from a non-banking firm at 18% interest and a tenure of 36 months. The APR in this case would come in at 20.16%, data from MyMoneyMantra shows (see graphic). This is because the lender will be levying a processing fee, insurance charges and other upfront charges, which would be included in the APR.
Banks typically provide the APR in case of credit card loans, and digital lenders provide it for some types of loans. With the recent announcement, the RBI is aiming for a uniform KFS structure across lenders and loan types for more transparency. Which charges will get included in APR? “The RBI wants the APR to be the effective annualized interest rate.
It should be based on an all-inclusive cost and margin including cost of funds, credit cost and operating cost, processing fee, verification charges, and maintenance charges. It will not include contingent charges like penal charges or late payment fees." says Adhil Shetty, chief executive and co-founder of BankBazaar. The long list of charges could vary from one lender to another.
“Typically, the charges are to do with either payment or non-payment. For example, there may be prepayment or pre-closure charges, which are charges related to payment, and there may be late payment fees, cheque bounce charges or EMI bounce charges, which are related to non-payment. Lastly, there may be fees on account of legal checks, paperwork, and statutory payments such as MOD ," says Shetty.
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