How to Compare Two Loan Offers Using EMI and Total Cost
Compare two loan offers properly: interest rate, tenure and processing fee, total cost of the loan, a worked example in rupees, and questions to ask the bank.
2 November 2026 4 min read
Why the lowest rate is not always the cheapest loan
When you shop for a personal loan, car loan or education loan, banks and lenders usually highlight one number: the interest rate. That rate matters, but it is only part of what you will pay. The tenure, the processing fee and other charges can change the real cost enough to make a slightly higher rate the better deal.
This guide shows a simple method to compare offers side by side. It is general information to help you do the arithmetic, not financial advice. Your loan agreement and the lender’s key fact statement are the documents that count.
The three numbers to collect for each offer
Before comparing anything, get the same set of figures in writing from each lender. Make sure both offers are for the same loan amount, otherwise the comparison is meaningless.
- Interest rate per year, and whether it is fixed or floating
- Tenure in months
- Processing fee, as a percentage or a fixed amount, and whether GST is added to it
- Any other compulsory charges, such as documentation charges or insurance bundled with the loan
Total cost of the loan: a simple formula
For each offer, work out the EMI and multiply it by the number of months. Subtract the loan amount to get the total interest. Then add the processing fee and any other compulsory charges. The result is what the loan really costs you over and above the money you borrowed.
Total cost = (EMI x number of months) minus loan amount, plus fees and charges.
Use the Filyzo EMI Calculator for the EMI, total interest and total payment, and the Percentage Calculator to turn a fee like 2 percent of the loan into rupees. Keep the figures in a small table so you can see both offers together.
A worked comparison of two offers
Suppose you need a personal loan of ₹5,00,000 for 5 years, which is 60 months, and you have two offers.
Offer A: 10.5 percent per year, processing fee 2 percent of the loan. EMI is about ₹10,747. Total paid over 60 months is about ₹6,44,817, so total interest is about ₹1,44,817. The fee is 2 percent of ₹5,00,000, which is ₹10,000. Total cost is about ₹1,54,817.
Offer B: 11 percent per year, flat processing fee of ₹2,000. EMI is about ₹10,871. Total paid is about ₹6,52,273, so total interest is about ₹1,52,273. Adding the ₹2,000 fee, total cost is about ₹1,54,273.
Offer A has the lower rate and an EMI about ₹124 smaller, yet Offer B costs about ₹544 less overall because of the much smaller fee. The gap is small here, but with a bigger fee or a shorter tenure the difference can swing further. There is also a cash flow point: lenders often deduct the processing fee from the amount they disburse, so with Offer A you might receive ₹4,90,000 in hand while repaying the full ₹5,00,000.
How tenure changes the picture
Tenure has a bigger effect on total interest than most people expect. Take Offer A again at 10.5 percent, but over 3 years, which is 36 months, instead of 5 years.
The EMI rises to about ₹16,251, but the total interest falls to about ₹85,044, compared with about ₹1,44,817 over 5 years. That is a saving of roughly ₹59,773 in interest, simply by repaying faster.
So when you compare offers, compare them at the same tenure first. Then decide on the tenure separately, based on how much EMI you can pay comfortably every month without stretching your budget. A lower EMI over a longer period feels easier but usually costs more in total.
- Compare offers at the same loan amount and the same tenure
- Then choose the shortest tenure whose EMI you can afford comfortably
- Keep some room in your monthly budget for emergencies
Questions to ask the bank before you sign
A few direct questions can reveal costs that the advertisement does not show. Ask for the answers in writing or check them in the key fact statement and loan agreement.
- Is the rate fixed or floating, and what is it linked to if floating?
- What is the total processing fee in rupees, including GST, and will it be deducted from the disbursal?
- Is any insurance compulsory, and is its premium added to the loan amount?
- What are the charges for part-prepayment or closing the loan early?
- What are the late payment charges and the charge for a bounced EMI?
- If the rate changes, will the EMI change or will the tenure change?