Question 1

What should I compare when choosing between loan offers?

Accepted Answer

Look beyond the interest rate alone. Compare the monthly EMI, total interest paid over the full tenure, processing fees, and the effective total cost, which adds fees to total payable. The lowest rate doesn't always mean the lowest overall cost.

Question 2

Is a lower EMI always the better loan?

Accepted Answer

Not necessarily. A lower EMI can come from a longer tenure, which usually means paying more total interest over the life of the loan. Compare total interest and effective cost alongside the EMI, not in isolation.

Question 3

What is the effective total cost of a loan?

Accepted Answer

Effective total cost is the total amount you'll pay over the life of the loan, including principal, interest, and processing fees. It's the most complete single number for comparing offers.

Question 4

How much does processing fee affect a loan comparison?

Accepted Answer

Processing fees are usually 0.5% to 2% of the loan amount, charged upfront. On a large loan this can be tens of thousands of rupees, enough to change which offer is actually cheaper once added to total interest.

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