EMI Calculator

EMI is calculated using the reducing-balance (diminishing balance) method: EMI = P × r × (1+r)^n / ((1+r)^n − 1), where P is the principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the total number of months. Each month, interest is charged only on the outstanding principal, so the interest component shrinks and the principal component grows over time. This formula is used by SBI, HDFC, ICICI, Bajaj Finance, and virtually every regulated lender in India.

In a flat-rate loan, interest is calculated on the original principal for the entire tenure, making the effective interest rate roughly double the stated rate. In reducing-balance loans (the standard in India for home, car, and personal loans from banks), interest is charged only on the remaining principal. RBI mandates that lenders disclose APR, which is the reducing-balance equivalent, so you can compare offers fairly. A flat rate of 9% is roughly equal to a reducing-balance rate of 16-17%.

Most banks and NBFCs default to reducing your loan tenure when you make a part-prepayment, keeping the EMI constant. This minimises total interest paid. However, you can request EMI reduction instead — this lowers your monthly outflow but results in slightly more total interest paid. SBI, HDFC, and ICICI all allow you to choose either option at the time of prepayment. For floating-rate home loans, there is no prepayment penalty as per RBI guidelines.

As of October 2025, typical ranges are: home loans 8.5–9.5% p.a. (varies with CIBIL score and lender), car loans 9–11% p.a., and personal loans 11–18% p.a. SBI home loans start at 8.5%, HDFC at 8.75%, and LIC HFL at around 8.65%. For personal loans, lenders like HDFC, ICICI, and Bajaj Finance charge 11–16% for salaried borrowers with good credit. Always get the sanction letter and check the exact reducing-balance rate before accepting a loan offer.