Since RBI's Digital Lending Guidelines, every digital loan must show an Annual Percentage Rate (APR) in the Key Fact Statement. APR converts every cost (interest, processing fee, GST and any other charge) into a single yearly rate on the money you actually receive.
How it's calculated
Add up every rupee the loan costs, divide by the amount disbursed to you, and scale it to a year. A 30-day loan that costs 47% of what you received has an APR of roughly 47% × (365 ÷ 30), which is more than 500%.
Why short-term APRs look high
A one-time fee spread over 30 days becomes huge when annualised. That's why a short-term loan's APR always looks dramatic next to a 12% home loan. It doesn't mean you pay that percentage of the amount. You pay the rupee cost shown in the KFS.
How to compare offers
- Compare APRs only between loans of similar tenure.
- Compare the total rupee repayment for the same amount and days.
- Check what lands in your bank account, not just the sanctioned amount.
- Make sure there's no prepayment charge, so repaying early saves money.