How it's calculated
Personal loans are unsecured loans repaid in equal monthly instalments, usually over 12 to 60 months, so the calculator takes the tenure in months. Each EMI pays the month's interest on the outstanding balance and repays the rest of the principal; the schedule shows both parts for every month.
The formula
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1), where P is the loan amount, r the yearly rate ÷ 12 and n the tenure in months. Total interest = EMI × n − P.
RBI's illustration of a Key Facts Statement uses a small personal loan: ₹20,000 at 15% for 24 months, with an instalment of ₹969.73 and total interest of ₹3,274. Including ₹400 of fees, the annual percentage rate on the ₹19,600 actually received is 17.07%, which shows how fees raise the real cost of a small loan.Reserve Bank of India The calculator reproduces that instalment and interest exactly: ₹969.73 a month and ₹3,274 of interest.
Worked example
A ₹5 lakh personal loan at 11% for 36 months has an EMI of ₹16,369 and total interest of ₹89,297.
| Line | Amount |
|---|---|
| Principal (loan amount) | ₹5,00,000 |
| Total interest | ₹89,297 |
| Total amount paid | ₹5,89,297 |
At 14%, the same loan costs ₹17,089 a month and ₹1,15,197 in interest.
Assumptions and limitations
- Fixed rate, monthly reducing balance. Most personal loans are fixed-rate. A foreclosure charge may apply to fixed-rate loans if it is in your loan agreement and KFS; floating-rate loans to individuals for non-business purposes carry no prepayment charge.Reserve Bank of India
- Fees are not in the EMI. Processing fees and insurance deducted from the payout raise the APR, not the EMI.
- No broken-period interest for a part month before the first EMI.