How it's calculated
An EMI (equated monthly instalment) is a fixed monthly payment that covers both interest and principal. Each month the lender first charges interest on the principal you still owe, and the rest of the EMI reduces that principal. Because the balance falls every month, the interest part shrinks and the principal part grows, while the EMI stays the same.
The calculator builds the full schedule month by month, so you can see exactly how much of each EMI is interest, and how a part-prepayment changes the tenure and the total interest. RBI requires lenders to give you the same kind of repayment schedule in the Key Facts Statement before you sign.Reserve Bank of India
The formula
- EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1), where P is the loan amount, r the annual interest rate ÷ 12 (as a decimal) and n the number of monthly instalments. At 0% the EMI is P ÷ n.
- Each month: interest = outstanding principal × annual rate ÷ 12; principal repaid = EMI − interest; new outstanding = old outstanding − principal repaid − any prepayment.
- Total interest = total of all EMIs − loan amount.
- Prepayment: the EMI stays the same and the loan closes earlier; interest saved = total interest as scheduled − total interest with prepayments.
RBI's own illustration in the KFS circular is a ₹20,000 loan at 15% for 24 months: an instalment of ₹969.73 and total interest of ₹3,274, with a first month of ₹250 interest and ₹720 principal. Our tests reproduce that schedule to within a rupee on every printed row (RBI rounds each row).
Worked example
A ₹10 lakh loan at 10% for 5 years has an EMI of ₹21,247 and costs ₹2,74,823 in interest over the five years.
| Line | Amount |
|---|---|
| Principal (loan amount) | ₹10,00,000 |
| Total interest | ₹2,74,823 |
| Total amount paid | ₹12,74,823 |
A single prepayment of ₹1 lakh with the 12th EMI saves ₹45,338 of interest and closes the loan 6 months early.
Prepayment charges
For floating-rate loans to individuals for purposes other than business, RBI does not allow banks and NBFCs to charge prepayment or foreclosure fees, whether you prepay in part or in full and whatever the source of the money.Reserve Bank of India Fixed-rate and business loans can carry charges, which must be stated in the sanction letter, loan agreement and KFS.
Assumptions and limitations
- Fixed rate for the whole tenure. On a floating-rate loan the lender resets the EMI or the tenure when the benchmark rate changes, and must tell you and offer the choice.Reserve Bank of India
- Monthly reducing balance. Interest is charged monthly on the outstanding principal. Flat-rate loans charge interest on the original amount and cost much more than the quoted rate suggests.
- No fees. Processing fees, insurance and other charges are not part of the EMI, but they are included in the APR shown in your KFS.
- The first EMI is due one month after disbursal. Broken-period interest for a part month at the start is not included.
- The monthly table shows the first 60 EMIs; the yearly table covers the whole loan.