EMI Calculator

How is EMI calculated?

EMI is calculated using the reducing-balance formula:

• P — Principal (loan amount)
• r — Monthly interest rate = Annual rate ÷ 12 ÷ 100
• n — Number of monthly instalments (tenure in months)

Worked example: ₹10,00,000 at 8.5% for 20 years (240 months).
r = 8.5 ÷ 12 ÷ 100 = 0.00708333…
(1+r)²⁴⁰ ≈ 5.3122
EMI = 10,00,000 × 0.00708333 × 5.3122 ÷ (5.3122 − 1) = ₹8,678

Each EMI covers two components: interest on the outstanding balance (high in early months) and principal repayment (which grows each month). This is why a higher tenure reduces your EMI but raises total interest paid.

EMI for a ₹10 lakh loan at common rates & tenures

Figures for ₹10,00,000 principal. Click any row's EMI to load it into the calculator.

Reducing balance vs flat rate — the most expensive misunderstanding

This calculator uses the reducing-balance method, the standard for home, car and most bank loans: interest each month is charged only on the principal you still owe, which falls as you repay. Some lenders — especially for short personal and consumer loans — instead quote a flat rate, where interest is calculated on the full original principal for the entire term, even though your outstanding balance is shrinking. The flat number always looks smaller, and it is almost always more expensive.

The difference is dramatic. Take a ₹1,00,000 loan over 5 years:

• At 10% flat, total interest = ₹1,00,000 × 10% × 5 = ₹50,000, so the EMI is (1,00,000 + 50,000) ÷ 60 = ₹2,500.
• At 10% reducing balance, the same loan charges only about ₹27,500 in total interest — an EMI of roughly ₹2,125.

Same headline "10%," nearly double the interest. In fact, a 10% flat rate on this loan is equivalent to a reducing-balance rate of around 17%. A useful rule of thumb is that a flat rate's true cost approaches nearly double the quoted number for longer tenures (the approximation is effective ≈ flat × 2N ÷ (N+1), where N is the number of instalments). Whenever a lender quotes a flat rate, convert it to the reducing-balance equivalent — or just compare the actual EMI and total-interest figures — before deciding anything looks cheap.

How your interest rate is actually set: repo, EBLR and the spread

The rate you type into this calculator doesn't come out of thin air. Since October 2019, the Reserve Bank of India has required banks to link new floating-rate retail loans to an external benchmark — most commonly the RBI repo rate (the rate at which the RBI lends to banks). Your actual rate is built in layers:

• External benchmark (e.g. the repo rate) — the base everyone shares.
• Spread / margin — a fixed amount the bank adds to cover its costs and profit.
• Credit risk premium — an adjustment for your credit score, income and loan type; a strong CIBIL score earns a lower premium.

Together these form the EBLR (External Benchmark Lending Rate), which now governs the large majority of new floating home loans (the older MCLR system is still in run-off for legacy loans). Because the benchmark is external and transparent, an RBI repo cut or hike feeds through to your EMI quickly — banks must reset external-benchmark loans at least every three months. When that happens, the lender typically keeps your EMI the same and adjusts the tenure, or keeps the tenure and adjusts the EMI. To see your revised numbers, just enter the new rate and your remaining principal above.

Reading your amortisation schedule

Open the month-by-month schedule and you'll notice something that surprises many first-time borrowers: in the early years almost all of your EMI goes to interest, and very little to reducing the principal. That's not a trick — it's arithmetic. Interest is charged on the outstanding balance, which is highest at the start, so the interest slice of a fixed EMI is largest then. As the balance falls, the interest slice shrinks and the principal slice grows, until the final EMIs are almost entirely principal.

On a 20-year home loan, the "crossover" point — where each EMI starts repaying more principal than interest — often doesn't arrive until somewhere around the 8th to 12th year, depending on the rate. Two practical consequences follow. First, paying off a long loan in the early years saves far more interest than paying it off near the end. Second, the equity you build in the first few years is smaller than the payments suggest, which matters if you plan to sell or refinance soon. The schedule above makes both of these visible for your exact numbers.

Prepayment and foreclosure: the fastest way to cut total interest

Because interest is charged on the outstanding balance, every rupee of prepayment permanently cancels all the future interest that rupee would have generated — and the earlier you do it, the more interest you kill, since early principal would otherwise have accrued interest for the longest. A single lump-sum prepayment in year 2 of a 20-year loan can save many times its own value in interest over the life of the loan.

A few things make prepayment especially attractive in India:

• The RBI prohibits banks from charging prepayment or foreclosure penalties on floating-rate term loans taken by individual borrowers — so prepaying a floating home loan is usually free. (Fixed-rate loans may still carry a charge; check your agreement.)
• Paying one extra EMI a year, or rounding your EMI up, quietly shortens the tenure and cuts total interest with no noticeable strain on monthly cash flow.
• When a rate cut lets the bank reduce your EMI, keeping the old (higher) EMI instead effectively turns the saving into an automatic prepayment.

To model a prepayment here, reduce the principal by the amount you'd pay down and re-run the calculator with the remaining tenure to see the new EMI or shorter payoff.

Fixed vs floating, and what the EMI figure leaves out

A fixed-rate loan locks your EMI for the term (or an initial period), giving certainty at the cost of a usually-higher starting rate; a floating-rate loan moves with the benchmark, so your EMI can rise or fall over time. Most long Indian home loans are floating, which is why the rate you enter is a snapshot, not a guarantee.

It's also worth remembering that the EMI is not the whole cost of borrowing. The true cost — often expressed as the APR — also includes one-off and recurring charges that this calculator doesn't know about: the processing fee (and the GST on it), loan insurance, documentation and legal charges, and stamp duty on the mortgage. For a fair comparison between two loan offers, look past the headline rate to the APR, or add any fees that are financed into the principal you enter above so the EMI reflects them.

How large an EMI can you actually afford?

Lenders don't just check whether you want a loan; they check whether the EMI fits your income. The common yardstick is FOIR (Fixed Obligation to Income Ratio), also called the debt-to-income ratio: the total of all your monthly EMIs (this loan plus any existing ones) divided by your net monthly income. Most lenders want that total to stay below roughly 40–50%, leaving enough income for living expenses and a cushion against rate rises.

It's a sensible personal limit too, even if a bank would approve more. A useful way to use this calculator is backwards: decide the maximum EMI you're comfortable with — say 35–40% of your take-home pay — then adjust the loan amount and tenure until the EMI lands there. That keeps the repayment sustainable through job changes, rate hikes and the unexpected, which is the whole point of borrowing responsibly.

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