Key Fact Statement for Online Payday Loans: How to Read It

The Key Fact Statement (KFS) is the short standardised document that shows what an online payday loan will really cost before you accept it. To read it well, check four things first: the net amount you will receive, the total you must repay, the Annual Percentage Rate (APR), and the date repayment falls due. This guide walks through each section with an illustrative example, so you can compare offers and spot problems before you commit.

What RBI requires a KFS to do

RBI's April 2024 circular on Key Facts Statements applies to retail and MSME term loans from regulated entities, and its digital lending directions apply the same requirement to loans made through apps and websites. The main protections are:

• You get it before the contract. The lender must provide the KFS before the loan contract is executed.
• It must be understandable. It must be in a language you understand, and the lender must explain it and obtain your acknowledgement.
• It has a unique proposal number, so the document can be traced to your particular offer.
• It stays valid for a set period. At least three working days for loans with a tenor of seven days or more, and one working day for a tenor under seven days.
• Unlisted charges are barred. A fee or charge not in the KFS cannot be levied at any stage without your explicit consent.
• APR covers the full cost. It must include interest and all charges levied by the lender.

Credit card receivables are outside this particular circular, which is one reason the format here will not look like a card statement.

The KFS, section by section

The exact layout follows RBI's standard annexure, though labels can vary slightly from one lender to another. Here is what to look for and the question to ask at each point.

Start with these four numbers

Net disbursed amount

This number catches many first-time borrowers out. If fees are deducted upfront, the money you receive is less than the sanctioned amount, yet you still repay on the full amount. Plan around the net figure rather than the headline.

Total amount to be paid

This is the amount leaving your account. Compare it with what you will have after rent, EMIs and other essentials next month, not with your gross income.

APR

A short tenure can make a loan look cheap in rupees, and annualising it can make the same loan look very high. APR is useful because it lets you compare offers of different tenors and fee structures on the same basis. It is annualised even when your loan lasts a few weeks, so read it together with the rupee cost.

Repayment date and instalments

Check the exact date and whether you are paying one bullet amount or several instalments. Your KFS should come with a repayment schedule. The date should fall after your salary or other income is due to arrive, with a margin for delays.

An illustrative comparison

The figures below are made up to show the method. They are not the rates or fees of CreditThirty or any lender. Both offers have a sanctioned amount of ₹20,000 and a 30-day tenor with one repayment.

Offer A shows half the interest, but it costs more once you count the upfront fee, and it leaves you with less cash. The rough annualised figure here is simple arithmetic (total cost divided by net amount, then scaled to 365 days) to show the idea. Your KFS gives the lender's APR, computed using RBI's method, which you should use for the real comparison.

Conditional charges: read what happens if things go wrong

These costs apply only in some circumstances, and they are the part borrowers skip most often.

• Penal charges. Check how they are computed for a late payment. RBI's rules bar capitalising penal charges, so no further interest is computed on them, and they should be reasonable and not treated as a way to add to revenue.
• Foreclosure or prepayment charges. See whether there is a fee for closing early. Loans through CreditThirty carry no foreclosure or prepayment fees, and the lender's other charges appear in your KFS. CreditThirty is a Lending Service Provider, and the lender is Salora Capital Limited, an RBI-registered NBFC.
• Bounce or mandate failure charges. See what applies if the auto-debit fails, and keep the mandate account funded. Our guide on how to apply for a payday loan online covers the e-mandate step.
• Third-party charges. Items such as insurance collected on actual basis must be disclosed separately and included in APR, and you should get receipts.

The qualitative section: do not skip it

The rest of the KFS is mostly words, but it is what you will need if there is a dispute.

Cooling-off period

Digital loans come with a cooling-off or look-up period, set by the lender's Board and not less than one day. During it, you can exit by repaying the principal and proportionate APR with no penalty. The lender may keep a reasonable one-time processing fee only if it was disclosed in the KFS. Note the end date in case you change your mind.

Recovery

Look for the clause on recovery agents and, for digital loans, whether a Lending Service Provider will act as a recovery agent and who authorises it.

Grievance redressal

The KFS should name the grievance process and the nodal or grievance officer. If you get no reply within 30 days, or are unhappy with the reply, you can complain through RBI's Complaint Management System. See our grievance redressal policy for how CreditThirty handles this.

Loan transfer and co-lending

Check whether the loan can be transferred to another entity, and whether more than one lender is involved. If so, you should know who you are dealing with.

Red flags in or around the KFS

Stop and ask before accepting if you see any of these:

1. No KFS at all, or you are told to accept first and read later.
2. A lender name you cannot find on RBI's list of registered NBFCs or among licensed banks.
3. A repayment instruction pointing to a personal account or a third party rather than the lender.
4. Numbers in the KFS that differ from what the app or an agent told you.
5. Pressure to accept right now, even though the KFS has a validity period.
6. An instruction to pay a fee to an agent or a Lending Service Provider. Under RBI's rules, the lender pays those fees directly.

If something looks wrong, decline, since you are under no obligation to accept an offer. You can also read our guide to spotting fake loan apps.

A quick checklist before you accept

• I know the net amount I will receive.
• I know the total amount I will repay and the exact date.
• I have compared the APR with any other offer I have.
• I understand what happens if I pay late or want to close early.
• The lender is a named regulated entity.
• I have noted the cooling-off period and the grievance contact in the KFS.
• I have saved a copy of the KFS and will keep the signed agreement.

To see the process on CreditThirty, read how it works or the ಪದೇ ಪದೇ ಕೇಳುವ ಪ್ರಶ್ನೆಗಳು. Approval depends on verification and the lender's credit appraisal, and you will see the KFS only once an offer is made.

Key takeaways

• The KFS must reach you before the contract, in a language you understand.
• Focus on net disbursed amount, total repayment, APR and due date.
• Charges not in the KFS cannot be levied without your explicit consent.
• A lower interest figure can still be the costlier loan once upfront fees are counted.
• Read the conditional charges, cooling-off period, recovery clause and grievance details as well.
• If there is no KFS, or the numbers do not match, do not accept.

Frequently asked questions

Is a Key Fact Statement mandatory for an online payday loan in India?

Yes, for loans covered by RBI's rules. RBI requires regulated lenders to give retail and MSME term loan borrowers a KFS before the contract is signed, and its digital lending directions require one for digital loans as well. Do not accept a loan if you have not been shown one.

Can a lender charge a fee that is not in the KFS?

Under RBI's rules, a lender cannot levy a fee or charge that is not mentioned in the KFS at any stage of the loan without your explicit consent. If you see such a charge, ask the lender for an explanation in writing and use its grievance process if it is not resolved.

How long is a KFS valid?

RBI requires a validity period of at least three working days for loans with a tenor of seven days or more, and one working day for loans with a tenor under seven days. During that window you can review the terms set out in the statement before deciding.