LoanVaaniThe calculation, in plain language
How is loan EMI calculated?
An equated monthly instalment (EMI) is a regular repayment made up of principal and interest. With a constant rate and monthly reducing balance, interest is calculated on the amount still outstanding. Early payments usually contain more interest; later ones repay more principal.
EMI = P × r ÷ (1 − (1 + r)−n)
- P is the loan amount before any fee deduction.
- r is the monthly interest rate: annual percentage rate of interest ÷ 1,200.
- n is the number of monthly payments.
At 0% interest, the formula becomes loan amount ÷ number of months. Processing fees can still create a borrowing cost even when the interest rate is zero.
What is the EMI for a ₹2 lakh loan?
Here is an illustration at a constant 12% annual interest rate, with no processing fee or other charges. These are calculated examples, not lender offers.
| Repayment period | Monthly EMI | Total interest | Total repayments |
|---|---|---|---|
| 12 months | ₹17,770 | ₹13,237 | ₹2,13,237 |
| 24 months | ₹9,415 | ₹25,953 | ₹2,25,953 |
| 36 months | ₹6,643 | ₹39,143 | ₹2,39,143 |
A longer period reduces the monthly EMI in this example but increases total interest. Compare both numbers with your regular expenses and existing repayments before choosing a term.
Why the interest rate is only part of the cost
A processing fee deducted upfront reduces the amount you receive while repayments still use the full loan amount. The estimated APR in this tool captures that difference by finding the monthly internal rate of return of these cash flows and multiplying it by 12.
This is a nominal annualized estimate, not an effective annual yield or a lender-certified APR. It includes only the fee and optional GST you enter. Actual disbursal dates, repayment dates, other charges, insurance and lender rounding can change the final figure.
The RBI’s KFS circular defines APR to include interest and other charges, and calls for an APR computation sheet and amortisation schedule. Compare this illustration with the lender’s Key Facts Statement and repayment schedule before agreeing to a loan.
What this calculator assumes
- The annual reducing-balance rate stays constant throughout the loan.
- The first instalment is due one month after disbursal, followed by equally spaced monthly payments.
- Processing fees and any added GST are deducted from the amount disbursed; they are not financed or charged again each month.
- There are no advance EMIs, moratoriums, prepayments, late charges, insurance costs or other fees.
- Calculations use unrounded values. Displayed totals round to rupees and the schedule rounds to paise, so adding displayed rows may produce a small rounding difference.
It does not model flat-rate loans, bullet repayments or changing floating rates. For those, use the lender’s actual repayment schedule.
Common EMI questions
Does a lower EMI mean a cheaper loan?
No. A longer repayment period can lower each instalment while increasing total interest. Compare total interest, all fees and the lender’s APR using the same loan amount and period.
Can I use this for a personal, home or business loan?
Yes, as an illustration when the loan uses a constant reducing-balance rate and equal monthly instalments. The tool does not establish eligibility, account for future rate changes or reproduce every product’s fee rules.
Are processing fees included in the EMI?
In this calculator, fees are deducted upfront and are not added to the EMI. They reduce net disbursal and increase the estimated APR. If your lender finances the fee or collects it separately, its cash flows will differ.
What if my fee already includes GST?
Enter the total inclusive fee as a percentage of the loan amount and turn off “Add illustrative 18% GST to the fee”. This avoids adding tax twice. Confirm the fee basis and tax treatment in the lender’s quote.
Why is my lender’s EMI slightly different?
The lender may use exact calendar dates, a different first instalment period, rate resets or different rounding. Ask for its amortisation schedule and the assumptions used in its calculation.
Is entering my numbers a loan application?
No. This calculator runs on this page and does not submit a loan application or assess your creditworthiness. It does not require your name, phone number or identity documents.
Methodology and source
The calculation uses the standard fixed-payment reducing-balance formula shown above. The explanation of KFS, APR and repayment disclosures references the RBI circular: Key Facts Statement for Loans & Advances, 15 April 2024. Source checked on 19 September 2026.