Start with the money you receive, not only the rate you see
A personal loan offer may show an interest rate that looks manageable, but the Key Facts Statement (KFS) helps you understand the full cost and repayment terms before you accept the loan.
The most useful figures to read together are:
- Sanctioned loan amount
- Processing fee and other charges
- Net amount that will reach your bank account
- Annual Percentage Rate (APR)
- EMI and number of instalments
- Total repayment over the loan tenure
- Any optional service or insurance charge
- KFS validity period and proposal number
The APR is not the same as the headline interest rate. RBI defines APR as the annual cost of credit to the borrower, including the interest rate and other charges associated with the credit facility.
What does RBI require a KFS to show?
The RBI Key Facts Statement circular dated 15 April 2024 harmonised KFS requirements for retail and MSME term loans offered by regulated entities.
For new retail and MSME term loans sanctioned on or after 1 October 2024, the circular requires a standardised KFS before the borrower executes the loan contract. The KFS must be in a language the borrower understands, its contents must be explained, and the borrower’s acknowledgement must be obtained.
The KFS also includes:
- A unique proposal number
- A validity period of at least three working days for loans with a tenor of seven days or more, and at least one working day for loans with a tenor below seven days
- An APR computation sheet
- An amortisation schedule showing repayment over the loan tenure
- A summary box forming part of the loan agreement
Credit-card receivables are excluded from this particular circular. Always check the rules and documents applicable to your product.
Worked example: ₹5 lakh personal loan
Consider this illustrative offer:
| Item | Example |
|---|---|
| Sanctioned loan amount | ₹5,00,000 |
| Annual reducing-balance interest rate | 14% |
| Tenure | 36 months |
| Approximate EMI | ₹17,089 |
| Approximate total of 36 EMIs | ₹6,15,197 |
| Illustrative processing fee deducted upfront | ₹5,000 |
| Approximate amount credited | ₹4,95,000 |
The EMI and total repayment are rounded estimates calculated for the example. Actual lender calculations may differ because of disbursement date, repayment dates, rounding, broken-period interest and the exact fee structure.
Notice the difference:
- The loan is sanctioned for ₹5,00,000.
- The borrower receives about ₹4,95,000 after the illustrative fee deduction.
- The borrower repays about ₹6,15,197 through EMIs.
That gap is why comparing only the interest rate can be misleading. The APR in the KFS is intended to capture the annual cost of credit, including applicable charges. Do not substitute your own rough calculation for the lender’s APR figure.
How to read each important KFS field
1. Sanctioned amount vs net disbursal
The sanctioned amount is the loan principal approved by the lender. Net disbursal is the amount actually credited after any permitted upfront deductions.
If the sanction letter says ₹5 lakh but the account receives less, look for the fee and deduction breakdown in the KFS. Ask the lender to explain any amount that is not clearly listed.
2. Interest rate vs APR
The interest rate is the rate used to calculate interest on the loan balance. APR is broader because it includes interest and other applicable charges associated with the credit facility.
When comparing two offers, check the APR alongside:
- Processing fee
- Documentation or service charges
- Insurance or other third-party charges, if applicable
- EMI and total repayment
- Any charge payable later during the loan
A lower headline rate does not automatically mean the lower-cost offer.
3. EMI and amortisation schedule
The amortisation schedule shows how each instalment is split between principal and interest and how the outstanding balance changes over time.
Check:
- Whether the EMI in the schedule matches the offer
- The first EMI date
- The number of instalments
- Whether the first instalment includes broken-period interest or another adjustment
- How part-prepayment or foreclosure is handled under the agreement
4. Optional products and consent
If insurance or another add-on is offered, ask whether it is optional, what it costs and whether it is included in the loan amount or deducted from the disbursal. Do not assume that accepting an add-on is necessary for every loan.
5. KFS validity and proposal number
Check the proposal number and validity period. If the offer expires, the lender may need to issue a refreshed KFS. Do not rely on a screenshot of an old offer if the terms have changed.
How to compare two lenders using their KFS
Use the same loan amount and a similar tenure for both offers. Then compare the following side by side:
| Comparison point | Lender A | Lender B |
|---|---|---|
| Sanctioned amount | From KFS | From KFS |
| Net disbursal | From KFS | From KFS |
| APR | From KFS | From KFS |
| EMI | From KFS | From KFS |
| Total repayment | Calculate from schedule | Calculate from schedule |
| Upfront charges | From KFS | From KFS |
| Late/other charges | From agreement/KFS | From agreement/KFS |
| Part-prepayment terms | From agreement | From agreement |
Do not compare one lender’s monthly flat rate with another lender’s annual reducing-balance rate as if they were the same measure. Use the APR and the actual repayment schedule.
Red flags to resolve before signing
Pause and ask the lender for clarification if:
- The amount credited is lower than expected and the deduction is not explained.
- The APR or EMI in the KFS does not match the offer shown to you.
- The repayment schedule is missing or does not add up to the stated tenure.
- A fee appears in the loan agreement but not in the KFS.
- An add-on is described as compulsory but you have not received a clear explanation of its cost and consent.
- The proposal number or validity period is missing.
- You are asked to transfer an advance fee to an individual or agent rather than the lender’s official payment channel.
Keep a copy of the KFS, sanction letter, signed agreement and disbursal statement.
Frequently asked questions
Is APR always higher than the interest rate?
It can be higher when applicable fees and other charges are included. The exact difference depends on the loan structure and the charges included in the APR calculation.
Does the sanctioned amount equal the amount credited to my account?
Not always. If an upfront fee or another permitted deduction is taken from the disbursal, the amount credited can be lower. The KFS should help you understand the deductions.
How many days do I get to review a KFS?
Under RBI’s 15 April 2024 circular, the minimum validity period is at least three working days for loans with a tenor of seven days or more and at least one working day for loans with a shorter tenor. Check the validity date on your own KFS.
Can I ask for the KFS in Hindi?
The RBI circular says the KFS should be written in a language understood by the borrower. Ask the lender for a version you can understand and for an explanation of the terms before signing.
Is a KFS the same as a sanction letter?
No. The KFS is a standardised summary of key facts, costs and repayment terms. The sanction letter and loan agreement may contain additional conditions. Read all of them before accepting the loan.
Your next step
Before accepting a personal loan, compare the APR, net disbursal, EMI and total repayment from the KFS—not just the advertised interest rate. If a fee or condition is unclear, ask the lender to explain it in writing before you sign.
Related MLE reading:
- Personal Loan KFS: What to Check Before You Sign
- Interest Rate vs APR on a Personal Loan: What Should You Compare?
- Personal Loan Sanctioned Amount vs Net Disbursal: Why You May Receive Less Than Approved
Official reference: