What is true APR on a loan app?

True APR is the all-in annual cost of borrowing — interest rate plus processing fee, GST, insurance, and any subscription. On short tenures, a 24% flat rate often becomes a 60%+ true APR.

Why is the headline interest rate misleading?

Headline rates exclude upfront deductions. A ₹10,000 loan with a 5% processing fee disburses only ₹9,500 — but you repay interest on ₹10,000. RBI's Key Fact Statement (KFS) is the only legally-binding APR figure.

True APR: the real cost of a loan app

Loan apps quote a flat or reducing interest rate. Neither tells you the all-in cost. True APR — what RBI requires on the Key Fact Statement (KFS) — folds in interest, processing fee, GST, insurance, and subscriptions. On a ₹10,000 / 3-month loan, a 24% headline rate often hides a 60%+ true APR.

The formula (simplified)

True APR = ((Total cost of credit ÷ Net disbursed amount) ÷ Tenure in years) × 100

Net disbursed = sanctioned amount minus processing fee, GST, insurance, and any other upfront deduction. Total cost = all interest + all fees over the tenure.

Worked examples

₹10,000 / 3 months / 24% flat / 5% PF + GST: Net ≈ ₹9,410. Total cost ≈ ₹1,190. True APR ≈ 50%.
₹25,000 / 6 months / 18% reducing / 3% PF + GST: Net ≈ ₹24,115. Total cost ≈ ₹2,485. True APR ≈ 22%.
Salary advance ₹5,000 / 30 days / ₹99 fee + ₹49/mo subscription: Net ≈ ₹5,000. Cost ≈ ₹148. True APR ≈ 36% (or higher if you keep the subscription).

Where to find it on every app

RBI's Digital Lending Guidelines (2022) mandate the Key Fact Statement (KFS) before disbursal. The KFS must show the APR. If an app skips this step, do not accept disbursal — it's a regulatory red flag.

Independently-reviewed apps with true APR

Browse all loan apps — every review shows the real APR range, not the headline.
Instant personal loan apps
Salary advance apps

The formula (simplified)

Worked examples

Where to find it on every app

Independently-reviewed apps with true APR

Related