Amortisation

The process of repaying a loan through scheduled instalments, and the table showing how each one splits between principal and interest.

APR Annual Percentage Rate

The total yearly cost of a loan expressed as a percentage, including interest and most mandatory fees. The fairest single number for comparing two offers.

Benchmark

The published reference rate a floating loan is linked to, such as the policy repo rate or a treasury bill yield. Your rate moves only when it moves.

Co-applicant

A person who applies jointly and shares repayment liability. Adding one can raise assessable income and eligibility.

Collateral Security

An asset pledged to secure a loan, which the lender can claim if repayment fails.

Credit score

A three-digit summary of your repayment history, generally on a 300–900 scale in India, used to decide both approval and pricing.

Down payment Margin money

The portion of an asset's cost you fund yourself. A larger down payment cuts the principal and the total interest.

DTI Debt to Income Ratio

Total debt obligations measured against income. Closely related to FOIR and used for the same purpose.

EMI Equated Monthly Instalment

The fixed monthly payment covering both interest and principal. The amount stays constant while its composition shifts from interest towards principal.

Fixed rate

An interest rate that stays constant for an agreed period, giving EMI certainty at a slightly higher starting cost.

Flat rate

Interest charged on the original principal for the entire tenure regardless of repayments. Costs far more than the same number quoted on a reducing basis.

Floating rate

An interest rate that moves with its benchmark. Changes affect your EMI, your tenure, or both.

FOIR Fixed Obligation to Income Ratio

The share of monthly income committed to fixed obligations including the proposed EMI. Lenders use it to cap how much they will lend.

Foreclosure Pre-closure

Repaying the entire outstanding balance in one payment and closing the loan before its scheduled end.

Hypothecation

A charge over a movable asset (typically a vehicle) that stays in your possession while the lender holds the claim.

Interest

The charge for borrowing money, quoted as an annual percentage. Its real cost depends on the calculation basis and the tenure.

KFS Key Fact Statement

A standardised one-place summary of a loan's essential terms, designed to make competing offers comparable.

LTV Loan to Value

The loan amount as a percentage of the assessed value of the asset securing it. Determines your minimum down payment.

Moratorium

An agreed period during which repayment is deferred, common in education loans. Interest usually continues to accrue.

Mortgage

A charge created over immovable property to secure a loan, giving the lender recourse to the property on default.

NOC No Objection Certificate

A lender's written confirmation that a loan is fully repaid and it has no further claim, collect it on closure.

Penal charge

A charge levied for a late or bounced payment, over and above the interest due.

Pre-EMI

Interest-only payments made on the disbursed portion of a loan before full disbursement, common with under-construction property.

Prepayment Part-payment

Paying more than the scheduled EMI to reduce the outstanding principal, cutting future interest.

Principal

The amount actually borrowed, before interest. Interest accrues on whatever part of it remains outstanding.

Processing fee

A one-time charge for assessing and setting up the loan, usually a percentage of the amount and often deducted from the disbursement.

Reducing balance

Interest charged only on the outstanding principal, which falls with every repayment. The standard method for mainstream retail loans.

Repo-linked rate

A floating rate linked to the Reserve Bank of India's policy repo rate. Changes in the repo rate pass through to the loan at each reset.

Spread Margin

The fixed percentage a lender adds to the benchmark to arrive at your rate. Normally fixed for the life of the loan and the part you can negotiate.

Tenure Term

The length of the repayment period. The strongest single lever on both your EMI and your total interest.