How to Read a Key Fact Statement (KFS) Before Signing Your Loan

What the KFS must contain

RBI prescribes the format. Expect these fields in this order:

• Loan proposal and type, sanctioned amount and disbursal schedule.
• Tenure, and whether repayment is EMI-based or otherwise.
• Interest rate, whether fixed or floating, and for floating the benchmark, spread and reset periodicity.
• All fees payable to the lender: processing, documentation, insurance, valuation, legal.
• Fees payable to third parties through the lender, such as insurance premiums.
• The Annual Percentage Rate: the all-in cost including fees, as a single yearly rate.
• Contingent charges: prepayment, late payment, cheque bounce, conversion fees.
• The EMI, the number of instalments and the total amount you will repay.
• Details of the recovery agent policy and the grievance redressal officer.
• For digital loans, the cooling-off period and the LSP involved.

The line that matters most: APR

APR converts interest plus all lender fees into one annual rate. It lets you compare a 10.5% loan with a 3% processing fee against an 11% loan with no fee, which on a short tenure can be cheaper. Compare APRs across offers, not interest rates. If the APR is much higher than the interest rate, the fees are heavy; ask what each one is.

Check the floating-rate details

For a repo-linked loan the KFS should show the benchmark (repo rate), your spread, and the reset frequency. The spread is what you are really negotiating; two banks at 7.75% today may have different spreads if one is using a temporary discount. Ask whether rate changes will alter EMI or tenure.

Check the contingent charges

Prepayment and foreclosure charges must be nil for floating-rate loans to individuals. For fixed-rate loans, see the percentage and the lock-in period. Late payment penalties must be a reasonable 'penal charge', not a higher interest rate, under RBI's 2023 rules. Conversion and switching fees tell you what a future repricing will cost.

The repayment schedule and total cost

The KFS shows the number of EMIs and the total amount payable. For a home loan, that total is often more than double the principal; seeing it in writing is a useful reality check on tenure choice. Confirm the EMI matches the one you were quoted verbally and matches our calculator for the stated rate and tenure.

If something is missing or different

A KFS that lacks the APR, omits a fee you were told about, or quotes a rate different from the sanction letter should stop the process. Ask the lender to reissue it. Anything not in the KFS cannot be charged later. Keep the KFS with your agreement; it is your evidence in any dispute, and the grievance officer named on it is your first escalation.