Money decisions rarely feel dangerous in the moment. A signature here, a quick EMI calculation there, and most people assume the bank has already done the maths for them. But now and then, a story pops up that will remind you of just how quietly a mistake can swell into something far more expensive.
Manish Shara, Co-founder and CEO of ZET, shares an experience in this case: "When Sunita, a 29-year-old school teacher in Bareilly, applied for her first personal loan to renovate her home, she expected the process to be simple. She had never used credit before and believed that a clean record would help her. Instead, she was offered an interest rate of 15.5%. Her colleague at the same school, who had years of steady repayment history, received the same loan at 12.4%."
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Her case is not unusual. It is a reminder of how small numbers on paper slowly reshape monthly budgets and long-term goals.
Why tiny interest gaps hit harder than you think?
Regarding this experience, Manish Shara says, "Many households bargain carefully on everyday expenses, but often overlook the cost that grows quietly in the background - the interest paid on loans. A small difference in interest rates may appear minor at first, yet over time, it can shape a family’s financial stability far more than expected."
Shara explains, "This effect becomes even more visible with larger loans. For a ₹40 lakh home loan taken for 20 years, the gap between 8.4% and 9.3% can add up to several lakhs. Families who compare school fees or grocery bills closely often do not review their loan terms with the same attention, even though the long-term impact is much greater."
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Every loan is assessed through the lens of risk. Regarding this, Shara shares, "Someone with a long and consistent repayment record is considered dependable and is offered lower rates. A new borrower with no credit history is seen as a higher risk and often pays more for the same loan. The difference may be only a few percentage points, but across many years, it becomes a substantial amount."
Shara explains further, "Many borrowers also judge affordability only by the EMI. Stretching repayments eases monthly pressure, but it can also distract you from the cumulative interest you end up paying, as they often come with longer tenures and higher total interest. Without understanding this clearly, borrowers may agree to terms that cost far more in the long run."
What can you do to save yourself lakhs?
Taking a loan without any advice can be dangerous and can affect one's financial decisions in the long term. Here, Shara explains, "There are practical steps that can ease this burden. Building a strong credit score of 750 or above early in life improves access to better interest rates. Secured credit cards or small-ticket loans, when repaid on time, help create a positive credit record."
He also adds, "Keeping credit utilisation moderate and avoiding multiple applications in a short period also supports a healthy score. For major loans, comparing the total repayment amount, not just the EMI, gives a clearer picture of true affordability."
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Credit, when understood well, can transform lives. Shara concludes, "India’s credit system is expanding rapidly, and more people are entering it each year. The real challenge is ensuring that awareness grows along with access. A difference of even one percentage point can save a household thousands, sometimes lakhs."
In the long run, understanding the true cost of borrowing is one of the most powerful financial tools anyone can have.
