EMI Calculator

How to use the EMI calculator

1. Loan type – choose home, car, personal or education loan. This changes the tax and prepayment notes under the result, not the maths.
2. Loan amount – the amount the bank actually lends you, not the price of the house or car.
3. Interest rate – the annual rate on your sanction letter or Key Facts Statement.
4. Loan tenure – enter it in years or switch to months. Use months for short loans such as a 9-month consumer loan.
5. Part-prepayment (optional) – add a one-time prepayment, say when you get a bonus, and choose whether to keep the EMI and cut the tenure or keep the tenure and cut the EMI.

The result shows the EMI, total interest, total amount payable, a chart of principal against interest for every year, and both a yearly and a month-by-month schedule.

EMI formula

Indian banks use the reducing balance method, where interest is charged each month on the balance still outstanding:

EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)

• P = loan amount (principal)
• r = monthly interest rate = annual rate ÷ 12 ÷ 100
• n = number of monthly instalments = years × 12

This is the same formula taught for EMI in Class 12 applied maths, and it is what Excel’s PMT function uses. Each month the bank first takes interest on the outstanding balance (balance × r) and the rest of your EMI reduces the principal. Because the balance is largest at the start, early EMIs are mostly interest.

Worked example: ₹30 lakh home loan

A ₹30,00,000 home loan at 8.5% a year for 20 years:

• r = 8.5 ÷ 12 ÷ 100 = 0.0070833 and n = 240
• EMI = 30,00,000 × 0.0070833 × (1.0070833)^240 ÷ ((1.0070833)^240 − 1) = ₹26,035
• Total paid = ₹62,48,327, so total interest = ₹32,48,327, more than the loan itself

In the first EMI, interest is ₹21,250 (30,00,000 × 0.0070833) and only ₹4,785 goes to principal.

How tenure and rate change your EMI

Stretching the loan from 20 to 30 years lowers the EMI by only ₹2,968 a month but adds about ₹20.6 lakh of interest. The rate matters too: the same 20-year loan at 9% has an EMI of ₹26,992, so a 0.5% higher rate costs ₹957 more every month and ₹2.30 lakh more over the loan.

EMIs for car, personal and education loans

The formula is the same for every loan type; only the typical rate and tenure differ. A ₹10 lakh loan at 10% for 5 years has an EMI of ₹21,247 and total interest of ₹2,74,823. A ₹5 lakh personal loan at 12% for 3 years has an EMI of ₹16,607. Shorter loans have bigger EMIs but much less total interest. For bike, gold or business loans choose “Other loan” and enter the lender’s rate.

Watch for flat-rate quotes, mostly from dealers and some consumer lenders. A flat rate charges interest on the full original amount for the whole term. A 10% flat rate on a 5-year loan works out to about 17.3% a year on a reducing balance.

Prepaying your loan

A part-prepayment goes straight to principal, so every later month is charged less interest. On the ₹30 lakh loan above, paying ₹2 lakh after the 24th EMI and keeping the EMI unchanged saves ₹6,22,877 of interest and closes the loan 2 years 7 months early. Choosing a lower EMI of ₹24,224 instead saves ₹1,91,158. RBI rules do not let banks charge prepayment fees on floating-rate loans to individuals for non-business use, so early lump sums cost nothing extra on most home loans.

Compare that with investing the same money: if your loan rate is above the after-tax return you expect, prepaying usually wins. Check returns with the SIP calculator or FD calculator.

Tips before you borrow

• Keep EMIs within budget. A common guideline is to keep all your EMIs together under 40% of take-home pay, which leaves room for savings and emergencies.
• Pick the shortest tenure you can afford, then prepay when you can.
• Ask for the Key Facts Statement, which shows the annual percentage rate including processing fees.
• Claim tax benefits under the old regime. Home loan interest on a self-occupied house is deductible up to ₹2 lakh a year and education loan interest has no cap. The income tax calculator shows whether those deductions make the old regime cheaper for you.