The interest rate is the number you compare. It is rarely the number that decides which loan costs less.
Two loans quoted at the same rate can differ by tens of thousands of rupees over their life. The difference sits in charges that are disclosed, technically, but never in the conversation where you choose.
Processing fee
Usually 0.5–3% plus GST, and often deducted from the disbursed amount rather than charged separately — so on a ₹5 lakh sanction you may receive ₹4.85 lakh while paying interest on ₹5 lakh. Always ask what actually reaches your account.
Legal and technical valuation
On secured loans, the lender charges you for its own lawyer’s title check and its own valuer’s inspection. Typically ₹5,000–15,000 combined, payable whether or not the loan completes.
Foreclosure and part-payment charges
On floating-rate home loans to individuals these cannot be charged. On fixed-rate loans, personal loans and business loans they very much can — commonly 2–5% of the outstanding. If there is any chance you will repay early, this clause matters more than a small rate difference.
Bundled insurance
A loan protection policy is often added at sanction, sometimes financed into the loan itself so you pay interest on the premium for the full tenure. Insurance may well be sensible, but it should be a decision you make, not a line you discover.
Conversion and switch fees
Moving from a higher spread to a lower one with your existing lender — or from fixed to floating — usually carries a fee of around 0.5% of outstanding. Worth knowing, because it is often cheaper than a full balance transfer to a new lender.
Penal and administrative charges
Late payment penalties, cheque bounce charges, duplicate statement fees, and a charge for the no-objection certificate at closure. Individually small, collectively a nuisance, and all avoidable with an auto-debit mandate.
How to compare properly
Ask every lender for the total amount you will repay over the full tenure, including all charges, and the amount that will actually reach your account on day one. Those two numbers decide which loan is cheaper. The headline rate, on its own, does not.
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