How to Evaluate Competing Loan Offers
A fraction of a percentage point in your interest rate might not seem like a big deal on paper, but when compounded over 10, 15, or 20 years, it can translate to lakhs of rupees. Our Loan Comparison Calculator strips away marketing jargon to show you exactly which offer is mathematically superior.
The Impact of Tenure
Banks often trick borrowers into accepting a loan with a slightly higher interest rate by offering a longer repayment tenure. A longer tenure reduces your monthly EMI (making the loan look "cheaper"), but drastically increases the total amount of interest you pay to the bank. Use Option A and Option B above to compare a short-term vs. long-term loan at the exact same interest rate to see this illusion in real-time.
Beyond the EMI: Hidden Costs to Consider
While our calculator provides a perfect mathematical baseline based on principal and interest, you must also manually account for these hidden charges before signing an agreement:
- Processing Fees: A bank might offer a lower interest rate but charge a hefty 1-2% upfront processing fee.
- Prepayment Penalties: If you plan to close the loan early, check if the bank penalizes you. Fixed-rate loans usually have strict prepayment penalties compared to floating-rate loans.
- Fixed vs. Floating Rates: Ensure you are comparing apples to apples. A floating rate might be cheaper today, but it carries the risk of rising alongside central bank policies.