The total cost of a loan is more useful than a headline rate. Two offers can advertise different percentages yet reverse order once mandatory fees, term length and the calculation method are included.
A practical comparison starts with the same borrowed amount and the same repayment horizon. Then record principal + interest + mandatory fees = total repayment. Keep late fees and extension costs separate because they apply only in specific scenarios, but read them before signing.
Five numbers to collect
| Number | Why it matters |
|---|---|
| Principal | The amount actually borrowed or disbursed. |
| Interest / rate basis | Check whether the rate is annual, monthly, daily, flat, reducing-balance or expressed another way. |
| AER / APR | An annualised measure can help comparison, but terminology and calculation standards matter. |
| Mandatory fees | Service, processing or other required charges can outweigh a lower headline interest rate. |
| Total repayment | The cash amount you expect to pay if you follow the agreed schedule. |
Worked comparison: same Rs. 50,000, same 90 days
These three scenarios are illustrative Loan24 calculations, not current offers from any lender. They show why comparing only the displayed percentage can be misleading.
| Scenario | Rate / fee assumption | Interest | Mandatory fee | Total repayment |
|---|---|---|---|---|
| A | 18% annual simple interest, no fee | Rs. 2,219 | Rs. 0 | Rs. 52,219 |
| B | 12% annual simple interest + Rs. 3,500 fee | Rs. 1,479 | Rs. 3,500 | Rs. 54,979 |
| C | 0.5% of principal per day for 90 days, no fee | Rs. 22,500 | Rs. 0 | Rs. 72,500 |
Scenario B advertises a lower annual interest rate than A, yet the mandatory fee makes B more expensive over this 90-day example. Scenario C shows why a small-looking daily percentage can become large when multiplied by many days.
The arithmetic behind the example
For simple annual interest, the example uses:
Scenario A: Rs. 50,000 × 18% × 90 ÷ 365 ≈ Rs. 2,219. Scenario B: Rs. 50,000 × 12% × 90 ÷ 365 ≈ Rs. 1,479, then add the Rs. 3,500 mandatory fee. Scenario C uses Rs. 50,000 × 0.5% = Rs. 250 per day; Rs. 250 × 90 = Rs. 22,500.
What CBSL expects regulated institutions to disclose
The Financial Consumer Protection Regulations apply to financial service providers regulated by CBSL and are intended to support clear, fair and transparent consumer information. Their credit-disclosure framework includes annual effective rate information, fees and charges, repayment details and consequences of default. A borrower should therefore ask for the written key facts and agreement rather than calculate from an advertisement alone.
AER, APR and displayed rate are not interchangeable labels
Loan24 may encounter different terms on lender websites. In Sri Lankan regulated disclosure, AER is an important formal term. Other services may display APR or a daily/monthly rate. Do not assume two percentages mean the same thing unless the calculation basis and included charges match.
How to compare two real offers in five minutes
- Set the same amount and term where possible.
- Write down the exact cash received.
- Write down every scheduled payment and mandatory fee.
- Add all scheduled payments to get total repayment.
- Calculate total borrowing cost = total repayment − cash received.
If one service gives only a rate but not enough information to calculate the total, treat the comparison as incomplete until the final terms are shown.
Costs that belong in a risk check, not the normal total
Late fees, penal interest, extension fees and collection costs may not be payable if the loan is repaid exactly as agreed. They still matter because they describe what happens if your plan fails. Read them before accepting the loan and use our loan extension guide and missed payment guide for scenario analysis.
Related guides
- Online lenders in Sri Lanka
- How loan extensions work?
- What happens if you miss a loan payment in Sri Lanka?
Frequently asked questions
Sources and methodology
Loan24 editorial note: This guide separates official source facts from Loan24 explanations and worked examples. Rules, fees and individual credit decisions can change; check the live source and your final agreement before acting.