Borrowing costs · Updated 18 October 2026 · 7 min read
An interest rate is the price of borrowing, usually quoted per year. On a personal loan it is not the only price. Fees, taxes on those fees, and the number of months you take to repay can change what leaves your account.
A range is not the rate you will be charged
Lenders often advertise a band, such as 12% to 20% a year. Where you fall in that band depends on their view of your income, existing repayments, credit history, and the product rules in force that day. A comparison can show the band. It cannot assign you a personal rate.
A short-term row on Zup Loans repeats a figure that brand has published. If a figure is missing, the table says “Not disclosed” or “Check current offer”. A published band is not the rate you will be charged.
Reducing balance, in plain terms
Most personal-loan EMIs in India are described on a reducing balance. Each month, interest is calculated on what you still owe. Part of the EMI pays that interest, and the rest reduces the principal. Early on, more of the EMI is interest. Later, more of it repays the principal.
A flat rate is different. Interest is calculated on the original amount for the whole tenure, even as you repay. A flat rate can look cheaper than a reducing-balance rate and still cost more. Ask which method the lender uses before you compare two numbers.
A teaching example, not a market rate
Take ₹1,00,000, repaid over 12 months, at 12% a year on a reducing balance. The monthly rate is 12 ÷ 12 ÷ 100, which is 0.01. The standard formula gives a regular EMI of ₹8,884.88. You would repay about ₹1,06,618 in total, so the interest is about ₹6,618. This is a classroom example. It is not a rate available in the market, and it ignores fees.
If the interest rate is zero, the EMI is simply the principal divided by the number of months. A zero-interest offer can still be expensive if a large fee is added. Put the fee into the calculator before you treat the offer as free.
What else moves the cost
- Processing fee, and whether GST is added on top.
- Whether the fee is paid upfront or added to the amount you borrow.
- Tenure. A longer tenure lowers the EMI and usually raises the total interest.
- Late fees and prepayment charges, which are easy to miss in an advertisement.
- The date interest starts, which can make the first or last instalment different.
Before you apply
Ask the lender for the rate that applies to you, the fee in rupees, and the total amount payable. Zup Loans can estimate an EMI from numbers you enter. That estimate is not a sanction letter.
Written by Zup Loans editorial desk. Specialist review is still pending before any live publication.