How to compare two loan offers properly

• Same principal. If one lender sanctions less, the EMIs are not comparable.
• Same tenure. A lower EMI over a longer tenure almost always costs more overall.
• Same rate type. A fixed rate and a floating rate carry different risks even at the same number.
• All fees in. Processing, documentation, legal, valuation, stamping and GST.

The cheaper-looking rate loses once its fee is counted. On short tenures fees matter a great deal; on a 20-year loan the rate usually dominates. Never decide from the rate alone.

Regulated lenders in India must give you a Key Fact Statement with the annual percentage rate, all charges, the recovery mechanism and the grievance contact. It is the single most useful document in the file — read it before the sanction letter.

Check the prepayment terms specifically. An offer that lets you prepay freely at a slightly higher rate can beat a cheaper loan that locks you in, if you intend to close early.

• Bundled insurance funded by the loan, which increases the amount you pay interest on.
• A rate valid only for the first year, resetting to a spread-linked rate afterwards.
• Advance EMIs collected at disbursal.
• Cheque bounce, late payment and statement charges, if your cash flow is uneven.
• Whether the rate is linked to an external benchmark that is passed on promptly when policy rates fall.

Enter both in the comparison tool to see EMI, total interest, fees and total outgo together, then check what each loan costs if you close it three years early.