How the result is calculated
An equated monthly instalment, or EMI, is the fixed sum that repays a loan, interest and principal together, in equal monthly payments. Indian banks quote home, car and personal loans this way, and so do lenders across South Asia. The arithmetic is the same annuity that sits behind any amortising loan: each month's interest is charged on the balance still owed, and the rest of the instalment reduces that balance.
EMIP × i × (1 + i)n ÷ ((1 + i)n − 1)
- P
- the loan amount
- i
- the monthly rate: the annual rate ÷ 12, as a decimal
- n
- the tenure in months
Some lenders quote a flat rate instead, which is common for vehicle leases in Sri Lanka, consumer durables and some personal loans. A flat rate charges interest on the original sum for the whole tenure, as if none of it were ever repaid, and spreads principal and interest evenly over the months: EMI = (P + P × rate × years) ÷ n. Because the balance actually falls every month, the effective cost is far higher than the number suggests. The calculator solves for the reducing-balance rate that the flat EMI implies, which is the figure to compare.
The processing fee is usually a percentage of the loan, and in India it carries GST at 18%; the interest itself is exempt. Both come out of the amount disbursed, while the EMI is still worked out on the full loan, so the true cost is higher than the quoted rate. The calculator shows it as an APR, twelve times the monthly rate that balances what you receive against what you repay, which is how the Reserve Bank's Key Facts Statement computes it.
Worked example
| Item | Amount | How it is obtained |
|---|---|---|
| Monthly rate, i | 0.875% | 10.5% ÷ 12 |
| EMI | 21,493.90 | 10,00,000 × 0.00875 × 1.0087560 ÷ (1.0087560 − 1) |
| Total interest | 2,89,634.02 | 60 EMIs less the 10,00,000 borrowed |
| Processing fee | 10,000.00 | 1% of 10,00,000 |
| GST on the fee | 1,800.00 | 18% of 10,000 |
| Amount received | 9,88,200.00 | 10,00,000 − 11,800 |
| APR | 11.02% | 12 × the monthly rate at which 60 × 21,493.90 repays 9,88,200 |
| Item | Amount | How it is obtained |
|---|---|---|
| Interest | 1,20,000 | 5,00,000 × 8% × 3 years |
| EMI | 17,222.22 | (5,00,000 + 1,20,000) ÷ 36 |
| Same 8% on a reducing balance | 64,054.58 | the interest it would charge instead |
| Reducing-balance equivalent | 14.55% | the rate 36 × 17,222.22 implies on 5,00,000 |
| Item | Amount | How it is obtained |
|---|---|---|
| Keep the EMI, shorten the tenure | 87,693.89 saved | 47 instalments instead of 60 |
| Keep the tenure, lower the EMI | 45,792.45 saved | EMI falls to 16,373.22 |
| Difference | 41,901.44 | shortening the tenure saves almost twice as much |
Reading the result
The headline is the monthly EMI, with the number of instalments and the total interest beneath it. The tiles give the total payable, the fee and tax taken up front with the amount you receive, and the APR. The derivations explain each one with your own figures: the EMI formula, the flat rate's reducing-balance equivalent when you choose a flat quote, and why the APR is above the rate.
The chart shows how each year's repayments split between principal and interest. In the early years most of the EMI is interest; by the last years it is nearly all principal, which is why a prepayment made early saves much more than one made late. The schedule lists every month or every year, and the CSV follows whichever view is on screen.
What changes the result
Tenure moves the EMI and the total interest in opposite directions. Stretching a loan from five years to seven lowers the instalment but raises the interest, because the balance stays higher for longer.
How the rate is quoted matters more than its size. A flat rate of 8% costs more than a reducing rate of 14%, so before comparing two offers convert any flat rate to its reducing equivalent, or compare their APRs.
A processing fee raises the APR most on small and short loans, where it is spread over fewer instalments. A prepayment saves most when it is made early and kept as a shorter tenure.
What is not included
The rate is fixed for the whole tenure. Many Indian home loans float with a benchmark, and the Reserve Bank requires lenders to offer a higher EMI, a longer tenure or a mix when the rate resets; run the calculator again at the new rate to see each. Insurance sold with the loan, stamp duty, legal and valuation charges, and any charge for prepaying are not included, nor is broken-period interest for a first instalment that does not fall exactly a month after disbursal. Prepayment is not modelled for a flat-rate loan, because how a lender rebates unearned interest depends on its own terms.
Using the result
Compare loans by their APR or, for a flat quote, by its reducing-balance equivalent, and ask for the Key Facts Statement, which must show the APR and every charge. Choose the shortest tenure whose EMI fits comfortably, and if you expect a bonus or a windfall, check the prepayment terms before you sign: a loan that lets you prepay without charge and shorten the tenure is worth more than a slightly lower rate that does not.