How it works
Reducing balance. With r = annual rate ÷ 1,200 and n months:
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1)
Each month, interest = opening balance × r, principal = EMI − interest, and the balance falls by the principal.
Flat rate. Total interest = P × annual rate × years. EMI = (P + total interest) ÷ n. The tool also finds the reducing-balance rate with the same EMI, so you can compare offers fairly.
Worked example
Kaveri Agencies borrows ₹5,00,000 at 10.5% a year for 36 months.
- r = 10.5 ÷ 1,200 = 0.00875 a month.
- (1 + r)36 ≈ 1.3684.
- EMI = 5,00,000 × 0.00875 × 1.3684 ÷ 0.3684 = ₹16,251.22.
- Total repaid ₹5,85,044, of which interest ₹85,044.
At 10.5% flat, interest would be ₹5,00,000 × 10.5% × 3 = ₹1,57,500 and the EMI ₹18,263.89 — the same as about 18.75% on reducing balance.
Notes and edge cases
- Floating rates change the EMI or the tenure when the rate is reset; this tool assumes a fixed rate.
- Part-prepayments reduce interest; rerun the tool with the new balance and remaining months.
- APR, not just the rate: fees and charges raise the real cost; RBI requires lenders to disclose the APR in the Key Facts Statement.
- MyRecords Lending keeps the loan book for NBFCs and lenders, with a repayment schedule on each loan. With Loan applications switched on, it prints the Key Facts Statement, with the APR, at sanction.