The cost of a short-term loan has three parts: interest, the processing fee and GST on the fee. Looking at only one of them can be misleading. This guide explains each part in plain words, shows worked examples and explains APR — the number that lets you compare loans fairly.
Part 1: Interest
With BrightDhan, the interest rate is 34% to 54% per year, set by the lender based on your profile. Because the loan is short, interest is charged only for the days you borrow:
Interest = Loan amount × yearly rate ÷ 365 × number of days
For ₹10,000 at 34% per year for 30 days: 10,000 × 0.34 ÷ 365 × 30 ≈ ₹279
At 54% per year it would be about ₹444.
Part 2: Processing fee
The processing fee is 10% to 20% of the loan amount, charged once. It is usually deducted from the loan amount, so the money you receive is a little lower than the loan amount.
For ₹10,000 with a 10% fee: ₹1,000.
Part 3: GST on the fee
18% GST is charged on the processing fee (not on the loan).
For a ₹1,000 fee: ₹180 GST → total fee ₹1,180.
Worked examples (30 days)
| Loan | Interest @ 34% | Interest @ 54% | Fee + GST @ 10% | Fee + GST @ 20% |
|---|---|---|---|---|
| ₹5,000 | ₹140 | ₹222 | ₹590 | ₹1,180 |
| ₹10,000 | ₹279 | ₹444 | ₹1,180 | ₹2,360 |
| ₹20,000 | ₹559 | ₹888 | ₹2,360 | ₹4,720 |
| ₹30,000 | ₹838 | ₹1,332 | ₹3,540 | ₹7,080 |
Illustrative figures. Your actual rate and fee are decided by the lender and shown in the Key Fact Statement.
What is APR and why does it matter?
APR (Annual Percentage Rate) shows the total yearly cost of a loan, including both interest and fees, as one percentage. RBI requires lenders to show the APR in the Key Fact Statement before you accept a loan.
For short loans, the APR is much higher than the interest rate because the one-time processing fee is spread over only a few weeks. That doesn't mean the loan is a bad deal — it means APR is the right number for comparing two loans, while the total rupee amount is the right number for checking whether the loan is affordable for you.
How to keep the cost low
- Borrow only what you need. The fee is a percentage, so a smaller loan costs less.
- Choose a tenure that matches your salary date — no longer than needed.
- Repay on time. Late fees can cost more than the loan itself, and late payment hurts your CIBIL score.
- Avoid rolling over one short loan into another.
- Read the KFS and compare the total repayment before you accept.
Try it yourself
Use the BrightDhan calculator — move the sliders for amount, days, interest and fee to see the interest, fee and total to repay in seconds.
The bottom line
A short-term loan's cost is easy to understand once you split it into interest, fee and GST. Check the total repayment to see if it is affordable, and the APR to compare offers. Ready to see your own offer? Apply in about 2 minutes.
Frequently asked questions
How is interest calculated on a short-term loan?
Interest = loan amount × yearly rate ÷ 365 × number of days. For ₹10,000 at 34% per year for 30 days it is about ₹279.
What is APR on a loan?
APR (annual percentage rate) is the total yearly cost of a loan including interest and fees. It is shown in the Key Fact Statement and is the best number to compare two loans.
