Loan Calculator

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Full loan analysis on a reducing-balance basis: monthly payment, total interest, total repayment and a year-by-year outstanding balance curve.

Inputs

Loan amount (₹ / $)

Annual interest rate (% p.a.)

Loan tenure (years)

Processing fee (%)

How to use this calculator: Loan Calculator

Full loan analysis on a reducing-balance basis: monthly payment, total interest, total repayment and a year-by-year outstanding balance curve. The example below is calculated by this page's real engine from the displayed inputs.

1Enter the amount you plan to borrow. Do not include your down payment in this field.
2Enter the lender's annual interest rate and choose the repayment tenure in years.
3Enter the one-time processing fee percentage shown in your loan offer to see the complete borrowing cost.
4Review monthly EMI, total interest, total repayment and the outstanding balance chart before selecting a loan.

Input guide and example values

Use values from the same measurement basis and time period. Conditional fields appear only when the related option is selected.

Input	Example value	Why it matters
Loan amount	2500000 ₹ / $	Measured or known loan amount used by the calculation engine.
Annual interest rate	8.5 % p.a.	Measured or known annual interest rate used by the calculation engine.
Loan tenure	20 years	Measured or known loan tenure used by the calculation engine.
Processing fee	0.5 %	Optional input; leave the supplied default only when it matches your case.

Formula, derivation and worked example

A reducing-balance loan charges interest only on the outstanding principal. Each equal instalment (EMI) is split between interest on the current balance and principal repayment; as the balance falls the interest share drops and the principal share rises. The closed-form annuity formula above returns the instalment that exactly clears the loan in n periods.

EMI = P · i · (1 + i)ⁿ / ((1 + i)ⁿ − 1), i = r / 1200, n = years × 12

Total interest = EMI × n − P

APR ≈ effective cost including one-time fees

Substitution steps

1. Monthly rate
i = r / 1200
= 0.007083
2. Number of periods
n = years × 12
= 240
3. Growth factor
(1 + i)ⁿ
= 5.441243
4. Instalment
P·i·(1+i)ⁿ / ((1+i)ⁿ − 1)
= 21,695.58
5. Total interest
EMI × n − P
= 2,706,939.4

Computed example results

Monthly payment (EMI): 21,696
Total interest: 2,706,939
Total repayment: 5,206,939
Interest as % of principal: 108.3%
Processing fee: 12,500
Total cost of borrowing: 2,719,439
Number of instalments: 240

Understanding the result

Read the main result together with supporting checks, assumptions, limits and intermediate values.

For a manual check, repeat the first equation, confirm the units and change one input at a time.

Common mistakes when using Loan Calculator

Do not mix units for Loan amount (₹ / $), Annual interest rate (% p.a.), Loan tenure (years). A unit mismatch changes the input magnitude even when the typed number looks reasonable.
Do not replace the displayed EMI = P · i · (1 + i)ⁿ / ((1 + i)ⁿ − 1), i = r / 1200, n = years × 12 relationship with a different convention without also changing the underlying assumptions; compare like-for-like methods when checking the result.
Do not treat Monthly payment (EMI) = 21,696 from the worked example as a universal answer. It belongs to the displayed example inputs and must be recalculated for the actual case.

Next logical calculator

Continue with EMI Calculator

Useful next check because both tools use Annual interest rate and Loan tenure, while EMI Calculator answers a different part of the same workflow.

Open EMI Calculator

How a reducing-balance loan works

Interest is charged on the unpaid loan balance, not on the original amount for the entire tenure.

During the early months, a larger part of the EMI pays interest. Later, more of the same EMI repays the principal balance.

How to choose a loan tenure

A shorter tenure increases the monthly EMI but normally lowers total interest. A longer tenure reduces monthly pressure but generally increases the full borrowing cost.

Choose a tenure that balances affordability, emergency savings and your ability to make future prepayments.

Formula

EMI = P · i · (1 + i)ⁿ / ((1 + i)ⁿ − 1), i = r / 1200, n = years × 12
Total interest = EMI × n − P
APR ≈ effective cost including one-time fees

Engineering notes

Compare official loan offers from multiple lenders before applying.
Check fixed versus floating interest-rate conditions carefully.
Maintain an emergency fund instead of using all savings for a down payment.

Formulas explained

EMI = P × i × (1 + i)^n / ((1 + i)^n − 1)

This reducing-balance formula calculates an equal monthly instalment that repays the loan and interest within the chosen tenure.

P: Principal loan amount
i: Monthly interest rate = annual rate ÷ 1200
n: Total monthly instalments

This is an illustration. Lender fees, rate resets, taxes, insurance and prepayment terms can affect the final cost.

EMI versus total borrowing cost

A low EMI does not always mean a cheaper loan. Compare the total repayment, total interest, processing fee and prepayment terms.

Effect of part-prepayment

Part-prepayments reduce outstanding principal. Depending on lender rules, they can lower the remaining EMI or shorten the remaining tenure.

Worked example

1₹25,00,000 at 8.5% p.a. for 20 years → i = 0.0070833, n = 240.
2EMI = 2 500 000 × 0.0070833 × 1.0070833²⁴⁰ / (1.0070833²⁴⁰ − 1) = ₹21,696.
3Total repayment = ₹52,07,043, of which ₹27,07,043 is interest.

Assumptions

Fixed interest rate for the whole tenure and no prepayment.
Interest compounds monthly, in line with normal retail lending practice.

Tips

One extra EMI a year on a 20-year loan typically cuts the tenure by roughly 4 years.
Compare lenders on total interest paid, not the headline rate — fees and reset frequency matter.

Frequently asked questions

What is the difference between flat and reducing-balance interest?

Flat interest is charged on the original principal for the entire tenure; reducing balance charges only on what you still owe. A 10% flat rate is roughly equivalent to 17–19% reducing balance.

How much does the tenure affect total interest?

Heavily. Extending the same loan from 15 to 25 years lowers the EMI by around 20% but can nearly double the total interest paid.

Does the processing fee change the EMI?

No — it is a one-time cost, but it raises the effective cost of the loan, which this calculator reports separately.

What inputs does the Loan Calculator use?

It uses Loan amount, Annual interest rate, Loan tenure, and Processing fee. Follow the unit printed for each field and choose any selectable option to match the real scenario.

What does the Loan Calculator calculate?

It calculates Monthly payment (EMI), Total interest, Total repayment, Interest as % of principal, Processing fee, Total cost of borrowing, and Number of instalments. With the displayed default inputs, Monthly payment (EMI) is 21,696.

Which formula does the Loan Calculator use?

The primary relationship is EMI = P · i · (1 + i)ⁿ / ((1 + i)ⁿ − 1), i = r / 1200, n = years × 12. The page also shows substituted values and calculation steps so the result can be checked independently.

How can I verify a Loan Calculator result?

First verify the units for Loan amount, Annual interest rate, and Loan tenure. Then compare the substituted formula steps with Monthly payment (EMI) and its displayed precision.

What are the limitations of the Loan Calculator?

Loan Calculator: This is an estimate, not a lender offer. Verify fees, taxes, rate changes, eligibility and repayment terms in the official product documents.

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