APR and APY: Meaning, Formulas and Differences

APR and APY: Meaning, Formulas and Differences

Annual percentage rate (APR) is the yearly cost of a loan including fees, and annual percentage yield (APY) is the yearly return on savings including compounding. Use APR to compare loans and APY to compare deposits.
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In summary

APR and APY both express a yearly rate, but they answer different questions. On a loan, the APR is the figure to compare. Lenders must show it in the Key Fact Statement (KFS) from 1st October, 2024.


  • 12% interest compounded monthly gives an APY of 12.68%.
  • A Rs. 2 lakh loan at 13% over 24 months, with an illustrative 2% fee, has an APR of 15.05%.
  • The fee lifts the APR above the interest rate.
  • The Bajaj Finance Personal Loan processing fee is up to to 4.13%.

Comparing loan offers on APR? Check your loan offer with your phone number and a one-time password (OTP) → apply online in about 5 minutes → receive funds within 24 hours* of approval.

What is the difference between APR and APY?

The difference between APR and APY is that APR adds fees to a loan's interest, while APY adds compounding to a deposit's interest. The table compares them on 5 points.


FeatureAPRAPY
Full formAnnual Percentage RateAnnual Percentage Yield
Used forLoans and creditDeposits and investments
Includes compoundingNoYes
Includes feesYes, such as the processing feeNo
Higher is better for youNoYes

Last updated: 19th October, 2026


Comparing APR and APY side by side is not useful, since they describe different products. Compare APR with APR, and APY with APY, and treat APR and APY as separate tools.

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How do you calculate APY?

Of APR and APY, APY is simpler to work out. You calculate APY as (1 + r ÷ n)^n − 1, where r is the annual rate as a decimal and n is the number of compounding periods a year. At 12% compounded monthly, APY = (1 + 0.12 ÷ 12)^12 − 1 = 12.68%. That is the deposit side of APR and APY.

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How do you calculate APR on a loan?

You calculate APR as the yearly rate at which the equated monthly instalments (EMIs) equal the amount you actually receive after fees. Because the fee cuts what you receive, the APR rises above the interest rate. This is the loan side of APR and APY. The Reserve Bank of India (RBI) requires the KFS to show this figure.


Worked example: Arjun in Bhopal

Arjun is 30 and works as a salaried sales executive in Bhopal. He earns Rs. 60,000 a month and has a CIBIL score of 750. He borrows Rs. 2 lakh for a family wedding at an illustrative 13% per annum over 24 months, and checks both the EMI and the APR, putting APR and APY to use.


EMI = P × R × (1 + R)^N ÷ [(1 + R)^N − 1]. P is the loan amount in rupees, R is the annual rate divided by 12 and by 100, and N is the tenure in months. The formula spreads the principal and interest into equal monthly payments, so early EMIs carry more interest and later ones more principal. All figures are rounded to the nearest rupee.


ItemFigure
Monthly EMIRs. 9,508
Total interestRs. 28,192
EMI as share of salary15.8%
Illustrative processing fee at 2%Rs. 4,000
Amount received after feeRs. 1,96,000
APR15.05%

Last updated: 19th October, 2026


The 2% fee is illustrative; the Bajaj Finance processing fee is up to to 4.13%, and a higher fee gives a higher APR. Arjun compares offers on APR, not on the interest rate alone, so he sees the full cost. Knowing APR and APY saves him from comparing a loan rate with a deposit yield.


What can delay approval: a CIBIL score below 650 or existing EMIs that take up a large share of your income. Names or addresses that do not match across documents, and more than one loan application in the same month, can also slow it down.


Checking the APR on your offer? With a Bajaj Finance Personal Loan, you can borrow Rs. 40,000 to Rs. 75 lakh, subject to eligibility. Check your loan offer with your phone number and a one-time password (OTP) → apply online in about 5 minutes → receive funds within 24 hours* of approval.

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What are the eligibility criteria and documents required?

Of APR and APY, only APR applies to your loan offer, and it depends on your profile. To be eligible for a Bajaj Finance Personal Loan, you need to meet the criteria listed below:


CriterionRequirement
NationalityIndian
Age21 years to 80 years.
Employed withPublic, private, or multinational companies (MNCs).
CIBIL Score650 or higher.
Customer profileSelf-employed or Salaried

*You should be 80 years or younger, at the end of the loan tenure.

Last updated: 19th October, 2026


Meeting these criteria does not guarantee approval, which depends on eligibility, verification and credit assessment. No collateral or guarantor is required.


You may need the following documents, subject to your profile and application:


Document categoryAccepted options
KYC proofAadhaar/ passport/ voter’s ID/ driving license/ Letter of National Population Register/ NREGA job card
Identity proofPAN card, Real-time image / photograph
Employment proofEmployee ID card, Letter of Allotment of Accommodation Issued by Employer
Income proofSalary slips — last 3 months, Bank account statements — last 3 months
OthersPension order, Utility bill, Phone bill, Piped gas bill, Property / Municipal tax receipt

Not every applicant needs every document. Confirm the final list of required personal loan documents during your application.

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What interest rate and charges apply?

Bajaj Finance interest rates and charges on a Personal Loan, the cost that the APR side of APR and APY measures, subject to applicable terms and customer eligibility, are listed below:


ChargeAmount
Interest rate10% to 30.5% per annum, subject to applicable terms and customer eligibility
Processing feeUp to to 4.13% of the loan amount, inclusive of applicable taxes
Bounce chargesRs. 700 to Rs. 1,200 per bounce
Penal chargeUp to 36% per annum on the overdue instalment
Part-prepayment and foreclosure (Term Loan)Up to 4.72% of the principal, inclusive of applicable taxes
Part-prepayment (Flexi Dropline and Flexi Hybrid Loans)No charge
Flexi facility chargeRs. 1,999 to Rs. 18,999, inclusive of applicable taxes
Annual maintenance (Flexi Dropline Loan)Up to 0.295% of the Dropline limit
Annual maintenance (Flexi Hybrid Loan)Up to 0.472% in the initial tenure; up to 0.295% in the subsequent tenure

Last updated: 19th October, 2026


Charges are disclosed in the applicable product information and loan documents, so read your Key Fact Statement before you accept. The KFS shows the APR, which combines the interest rate and these fees. Add the processing fee to the interest when you compare offers, and see the personal loan interest rates and charges page for details.

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When is APR not the full picture?

Of APR and APY, APR is the loan measure, but it is not the full picture when charges depend on how you repay, such as bounce or penal charges. The table shows what APR leaves out.


CostIn the APR?What to check
Interest and processing feeYesKFS
Bounce and penal chargesNoFees table
Part-prepayment and foreclosure chargesNoKFS

Last updated: 19th October, 2026


Read the full fees table alongside APR and APY figures. Repaying on time keeps the cost close to the APR shown among APR and APY figures.

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How do you apply?

You apply for a Bajaj Finance Personal Loan online in five steps:

  1. Check loan eligibility: Enter the required loan amount and repayment period, then click "CHECK LOAN OFFER".
  2. Enter personal details: Enter personal, financial and employment details to receive a personalised offer.
  3. Loan offer: Review the offer details and adjust the amount or tenure to suit the applicant's needs.
  4. KYC verification: Complete KYC and verify bank details.
  5. Talk to loan specialist: The application is submitted and an executive contacts the applicant about the next steps.

The process may differ for new and existing customers, and some customers may need to provide additional documents. Read the APR in your KFS before you accept the offer.

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Key offerings: 3 loan types

  • Flexi Hybrid Loan
  • Flexi Dropline Loan
  • Term Loan

  • Withdraw and prepay – no extra charges
    You can withdraw from your limit and prepay as many times as you want, without extra charges.

  • Instalment pattern
    You can pay interest-only EMIs for up to 36 months, after which, the EMI will consist of both, the principal and the interest. EMI is applicable only on the withdrawn amount.

  • Flexi facility charges
    Flexi facility charges applicable based on your loan amount.

  • Withdraw and prepay – no extra charges
    You can withdraw from your limit and prepay as many times as you want, without extra charges.

  • Instalment pattern
    Fixed EMIs that cover both the principal and interest on the loan amount you withdraw.

  • Flexi facility charges
    Flexi facility charges applicable based on your loan amount.

  • Amount disbursed in one go
    The entire loan amount is disbursed at the start.

  • Instalment pattern
    Fixed EMIs that cover both the principal and interest.

  • Flexi facility charges
    No Flexi facility charges.

Personal loan interest rate and applicable charges

Type of fee

Applicable charges

Rate of interest per annum

10% to 30.5% p.a.

Processing fees

Up to 4.13% of the loan amount (inclusive of applicable taxes).

Flexi Facility Charge

Term Loan – Not applicable

Flexi Loans –Up To Rs 1,999 To Up To Rs 18,999/- (Inclusive Of Applicable Taxes)

Will be deducted upfront from loan amount.

Bounce charges

Rs. 700 to Rs. 1,200/- per bounce

“Bounce charges” shall mean charges for (i) dishonor of any payment instrument; or (ii) non-payment of instalment (s) on their respective due dates due to dishonor of payment mandate or non-registration of the payment mandate or any other reason.

Part-prepayment charges

Full Pre-payment:

  • Term Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount as on the date of full pre-payment

  • Flexi Term (Dropline) Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount, as on the date of full prepayment.

  • Flexi Hybrid Term Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount, as on the date of full prepayment.

Part Pre-payment

  • Up to 4.72% (Inclusive of applicable taxes) of the principal amount of Loan prepaid on the date of such part Pre-Payment.

  • Not Applicable for Flexi Term (Dropline) Loan and Flexi Hybrid Term Loan.

Penal charge

Delay in payment of instalment(s) shall attract Penal Charge at the rate of up to 36% per annum per instalment from the respective due date until the date of receipt of the full instalment(s) amount.

Stamp duty (as per respective state)

Payable as per state laws and deducted upfront from loan amount.

Annual maintenance charges

Term Loan: Not applicable

Flexi Term (Dropline) Loan:

Up to 0.295% (Inclusive of applicable taxes) of the Dropline limit (as per the repayment schedule) on the date of levy of such charges.


Flexi Hybrid Term Loan:

Up to 0.472% (Inclusive Of Applicable Taxes) Of The Dropline Limit During Initial Tenure. Up to 0.295% (Inclusive Of Applicable Taxes) Of Dropline Limit During Subsequent Tenure

Credit guarantee scheme feeUp to 1.18% p.a. (pro-rated daily till 31st March) (inclusive of all applicable taxes) of the loan amount
Credit guarantee scheme renewal feeUp to 1.18% p.a. (inclusive of all applicable taxes) on the outstanding loan amount as on April 01 of the subsequent Financial Year.
*Renewal Fee to be collected only for 3 subsequent financial years.
 
**If the Remaining Tenure is less than 12 months, the CG Fee in subsequent years shall be charged prorated.

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Frequently asked questions

Understanding the terms

Using APR

Why is APR higher than the interest rate?

APR includes fees, such as the processing fee, while the interest rate does not. In Arjun's example, a 13% rate with an illustrative 2% fee gives an APR of 15.05%, because he receives Rs. 1,96,000 but repays EMIs on Rs. 2 lakh. When you compare APR and APY, remember only APR includes loan fees, so use it for loans.

Yes, for savings. A higher APY means your deposit earns more over a year, because compounding adds interest on interest. For a loan, the opposite applies: a lower APR means a cheaper loan. Keep the 2 apart when you read APR and APY figures on product pages and deposit statements.

Lenders regulated by the RBI must show the APR in the Key Fact Statement from 1st October, 2024. Read it before you accept any loan. It lets you compare offers with different rates and fees on one figure, rather than looking at APR and APY in isolation. Ask the lender if any figure is unclear.

No. APR covers interest and the fees you pay to take the loan, not charges that depend on how you repay. Bounce, penal and foreclosure charges sit outside it. Paying every EMI on time keeps your actual cost close to the APR, and the fees table lists every other charge outside APR and APY.

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Bajaj Finance Limited has the sole and absolute discretion, without assigning any reason to accept or reject any application. Terms and conditions apply*.
For customer support, call Personal Loan IVR: 7757 000 000