Question 1

What is the effective APR on an Indian home loan?

Accepted Answer

The effective APR on an Indian home loan includes the stated interest rate plus processing fees (typically 0.5%–2% of the loan amount), 18% GST on those fees, HLPP insurance (0.5%–1%), and legal and valuation charges. For a ₹50 lakh home loan at 8.75%, these hidden costs of ₹60,000–₹1 lakh can push the effective APR 0.1%–0.3% higher than the advertised rate.

Question 2

Are banks required to disclose the true cost of a loan in India?

Accepted Answer

Yes. RBI's Key Facts Statement (KFS) guidelines require banks and NBFCs to disclose the Annual Percentage Rate covering all mandatory charges. However, many lenders still advertise only the interest rate. This calculator lets you compute the real APR yourself before you sign any documents.

Question 3

Is HLPP insurance mandatory for a home loan in India?

Accepted Answer

No. RBI guidelines explicitly prohibit banks from making loan disbursement conditional on purchasing HLPP or any bundled insurance product. You have the legal right to decline it. Buying a standalone term insurance policy separately is almost always cheaper than the bundled HLPP premium.

Question 4

How is the processing fee calculated on a home loan?

Accepted Answer

Processing fees are typically 0.25%–1% of the loan amount, subject to a cap (e.g. ₹15,000–₹50,000). Banks charge 18% GST on top of the processing fee. A ₹50 lakh loan with a 0.5% processing fee incurs ₹25,000 + ₹4,500 GST = ₹29,500 upfront — before you even receive the money.

Nobody shows the real cost.