Two lenders quote 9.1% and 9.4%. The cheaper one is not automatically cheaper. Six numbers decide what a loan actually costs, and the rate is only the most visible.
1. The spread, not the headline rate
Floating loans are benchmark plus spread. The benchmark moves for everyone; the spread is yours for the life of the loan. Ask for it in writing. A 9.1% built on a wide spread will be worse than 9.4% on a narrow one the moment rates move.
2. Processing and legal charges
0.5% on ₹60 lakh is ₹30,000, plus valuation, legal and documentation fees. Add them up before comparing anything.
3. Prepayment and foreclosure terms
Free on floating-rate home loans to individuals; often 2–5% on fixed-rate and on many business loans. If there is any chance of an early exit, this clause can outweigh the whole rate difference.
4. Whether insurance is bundled
Many sanctions quietly add a single-premium insurance policy to the loan amount. You then pay interest on the premium for twenty years. It is often optional. Ask.
5. Reducing versus flat interest
Mostly a business and vehicle loan issue. “7% flat” is roughly 13% on a reducing basis. If the two offers use different methods, they are not comparable until you convert them.
6. Total interest over the tenure
The number that settles it. Two offers with the same rate and different tenures are not the same loan. Run both through an EMI calculator and compare total outgo, not monthly outgo.
One practical tactic
Get one sanction in writing, then take it to the other lender. A competing sanction letter moves rates more reliably than negotiation does, because it is evidence rather than a request.
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