How to use this loan comparison calculator
- Enter the loan amount. It is the same for both loans, so the comparison is like for like.
- Enter the Loan A rate and the Loan B rate, each as a yearly rate on a reducing balance.
- Set the Loan A tenure and the Loan B tenure in years.
- Enter the Loan A processing fee and the Loan B processing fee in rupees, before GST. The calculator adds 18% GST to each.
The result tells you which loan is cheaper and by how much. For each loan it shows the EMI, total interest, total cost and effective APR, then a side-by-side table and a chart of what each loan has cost you by every year.
How the comparison works
Total cost = (EMI × number of EMIs − loan amount) + processing fee × 1.18 The first part is the total interest. The second is the processing fee plus 18% GST.
Each EMI is worked out on a reducing balance. The effective APR is the yearly rate at which the cash you actually get, the loan less the fee and GST, equals the EMIs you pay. Total cost tells you which loan is cheaper overall; APR tells you which costs less per year.
Worked example
You need ₹5 lakh. Loan A is offered at 11% for 3 years with a ₹5,000 processing fee (₹5,900 with GST). Loan B is 10.5% for 5 years with a ₹2,500 fee (₹2,950 with GST).
Loan B's EMI is ₹10,746.95, ₹5,622.41 a month lower than Loan A's ₹16,369.36. But over 5 years Loan B charges ₹1,44,817 in interest, against ₹89,297 for Loan A. Adding the fees, Loan A costs ₹95,197 in all and Loan B ₹1,47,767, so Loan A is cheaper by ₹52,570.
| Loan A | Loan B | |
|---|---|---|
| Interest rate | 11% | 10.5% |
| Tenure | 3 years | 5 years |
| Monthly EMI | ₹16,369.36 | ₹10,746.95 |
| Processing fee + 18% GST | ₹5,900 | ₹2,950 |
| Total interest | ₹89,297 | ₹1,44,817 |
| Total cost | ₹95,197 | ₹1,47,767 |
| Effective APR | 11.82% | 10.76% |
Why the lower EMI is often the dearer loan
A lower EMI usually comes from a longer tenure, and every extra year means another year of interest. In the example, Loan B even has the lower effective APR, 10.76% against 11.82%, because APR measures cost per year, not the total you pay over a longer term.
The answer can change if you plan to repay early. The chart shows what each loan has cost by every year, which is also what it would cost if you closed it then. Here, Loan B is cheaper only if you clear it within the first year, ignoring any foreclosure charge. If the higher EMI is a stretch, a longer tenure with part-prepayments whenever you can afford them may be a middle path, as long as the loan allows prepayment without a charge.
Lower rate or lower processing fee?
A lower rate does not always win once the fee is counted, especially on shorter loans. Two offers on ₹5 lakh, both for 3 years:
| Loan A | Loan B | |
|---|---|---|
| Interest rate | 10.5% | 11% |
| Processing fee | ₹10,000 | ₹2,500 |
| Monthly EMI | ₹16,251.22 | ₹16,369.36 |
| Processing fee + 18% GST | ₹11,800 | ₹2,950 |
| Total interest | ₹85,044 | ₹89,297 |
| Total cost | ₹96,844 | ₹92,247 |
| Effective APR | 12.15% | 11.41% |
Loan A saves ₹4,253 of interest, but its fee and GST are ₹8,850 higher, so Loan B is cheaper by ₹4,597 even though its EMI is ₹118.14 higher. To work out GST on a fee yourself, use the GST calculator.
What else to check before you choose
- How the rate is quoted. Indian loans are repaid in monthly EMIs on a reducing balance, but some personal and car loans are quoted at a flat rate, which costs much more than the same reducing-balance rate. Compare like with like.
- Prepayment and foreclosure. Under RBI rules, lenders cannot charge prepayment or foreclosure fees on floating-rate loans to individuals for non-business purposes. Fixed-rate loans may carry a charge, which matters if you might close the loan early.
- Your budget. The cheaper loan is only right if you can keep up its EMI. Check that it fits within your FOIR, the share of take-home pay lenders allow for EMIs.
To study one offer in more depth, use the personal loan EMI calculator or the car loan EMI calculator. If you already have a home loan and another lender offers a lower rate, the home loan balance transfer calculator shows whether moving pays off.
Frequently asked questions
How do I compare two loan offers?
Is the loan with the lower EMI always cheaper?
Should I choose the lower interest rate or the lower processing fee?
Is GST added to the loan processing fee?
What is the effective APR of a loan?
What if one lender quotes a flat rate?
Sources and further reading
Independent, official guidance on this topic. Rules differ by country, so check the regulator where you live.
- Reserve Bank of India: regulations, notifications and consumer awareness · Reserve Bank of India
This calculator gives estimates for education and planning. It is not financial advice, and your lender's figures may differ. See how we calculate.