Loan EMI Calculator

An EMI (equated monthly instalment) is a fixed monthly payment that covers that month’s interest and repays part of the principal. On a reducing-balance loan the lender works it out with this formula:

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

P is the loan amount, r is the monthly rate (annual rate ÷ 12 ÷ 100) and n is the number of monthly instalments. At 0% interest the EMI is simply P ÷ n.

Worked example. ₹10,00,000 at 9% a year for 20 years: r = 0.0075 and n = 240, so the EMI is ₹8,997. The first EMI is ₹7,500 interest and just ₹1,497 principal; by the last one, interest is ₹67. Over 20 years you pay ₹11,59,342 in interest, more than the loan itself.

Reducing balance vs flat rate

A reducing-balance rate charges interest only on what you still owe. A flat rate charges interest on the original amount for the whole tenure, even as you repay. The two are not the same price, even with the same number in front of them.

₹1,00,000 for 2 years at 10%: flat rate gives an EMI of ₹5,000 and ₹20,000 interest. Reducing balance gives ₹4,614 and ₹10,748 interest. A 10% flat loan costs about the same as an 18.2% reducing-balance loan, which is why you should always ask which method a quote uses.

Processing fees and GST

Processing fees are charged once, often as a percentage of the loan, and GST at 18% is usually added on top. Most lenders deduct both from the amount they pay you, so the EMI doesn’t change but you receive less.

₹5,00,000 at 10.5% for 5 years with a 2% fee: the fee is ₹10,000 plus ₹1,800 GST, so ₹4,88,200 reaches you. The EMI is ₹10,747 and interest is ₹1,44,817, but your real cost is ₹1,56,617 and the effective annual cost (APR) is about 11.54%, not 10.5%. That APR comes from the actual cash flows: what you receive on day one against every EMI you pay.

How years and months change the EMI

Tenure is counted in months, so 7 years 6 months is 90 instalments. Enter the years and months separately here; there is no need to convert to 7.5 years. For ₹5,00,000 at 10.5%:

Six more months lower the EMI by ₹380 but add ₹16,379 of interest.

How prepayment reduces interest

A prepayment goes straight to the principal, so every later month’s interest is charged on a smaller balance. Timing matters: the same amount saves more the earlier you pay it.

On the ₹10,00,000, 9%, 20-year loan above, paying an extra ₹2,00,000 with the 24th EMI (when ₹9,62,567 is still owed) and keeping the EMI the same ends the loan 81 months early and saves ₹5,32,499 in interest. Keeping the tenure instead cuts the EMI to ₹7,124 and saves ₹2,04,544.

Common EMI calculation mistakes

• Comparing a flat-rate quote with a reducing-balance quote as if they were the same rate.
• Ignoring the processing fee, GST and insurance when comparing offers. Compare the APR or total cost instead.
• Typing 7.5 years as 7 years 5 months. Half a year is 6 months.
• Assuming a prepayment counts from day one. It only reduces interest from the month you pay it.
• Choosing the longest tenure for the smallest EMI without looking at the extra interest it adds.
• Expecting statement-level precision. Lenders charge interest by days, and the first EMI often includes broken-period interest from the disbursal date, so actual figures can differ slightly.