What is EMI and How is it Calculated?
EMI (Equated Monthly Installment) is the fixed monthly payment you make to repay your loan. It consists of two parts:
- Principal Amount – The actual loan amount borrowed (₹10,00,000).
- Interest Amount – The cost of borrowing money, based on the interest rate.
The EMI formula used by banks and financial institutions is: EMI=P×R×(1+R)N(1+R)N−1EMI = \frac{P \times R \times (1+R)^N}{(1+R)^N – 1}EMI=(1+R)N−1P×R×(1+R)N
Where:
- P = Loan Amount (₹10,00,000)
- R = Monthly Interest Rate (Annual Rate ÷ 12 ÷ 100)
- N = Loan Tenure in Months
EMI Breakdown for a 10 Lakh Personal Loan
Let’s take an example of a 10 lakh personal loan at 10% interest rate per annum.
Case 1: 3-Year Tenure (36 months)
- Loan Amount: ₹10,00,000
- Interest Rate: 10%
- Tenure: 36 months
- Monthly EMI: ₹32,267
- Total Repayment: ₹11,61,612
- Total Interest Paid: ₹1,61,612
Case 2: 5-Year Tenure (60 months)
- Loan Amount: ₹10,00,000
- Interest Rate: 10%
- Tenure: 60 months
- Monthly EMI: ₹21,247
- Total Repayment: ₹12,74,820
- Total Interest Paid: ₹2,74,820
Case 3: 7-Year Tenure (84 months)
- Loan Amount: ₹10,00,000
- Interest Rate: 10%
- Tenure: 84 months
- Monthly EMI: ₹16,602
- Total Repayment: ₹13,94,568
- Total Interest Paid: ₹3,94,568
Monthly EMI Comparison Table (10 Lakh Loan)
| Loan Tenure | Monthly EMI | Total Interest | Total Repayment |
|---|---|---|---|
| 3 Years (36 months) | ₹32,267 | ₹1,61,612 | ₹11,61,612 |
| 5 Years (60 months) | ₹21,247 | ₹2,74,820 | ₹12,74,820 |
| 7 Years (84 months) | ₹16,602 | ₹3,94,568 | ₹13,94,568 |
Factors Affecting Your EMI
- Interest Rate – Higher rates increase your EMI.
- Loan Tenure – Shorter tenure means higher EMI but lower interest.
- Credit Score – A good credit score (750+) gets you lower interest rates.
- Prepayment Option – Paying early reduces overall interest burden.
Smart Tips to Manage a 10 Lakh Loan EMI
- Choose the Right Tenure: If you want smaller EMIs, go for a longer tenure. If you want to save interest, choose shorter tenure.
- Compare Interest Rates: Use a personal loan EMI calculator before applying.
- Avoid Defaults: Missing EMIs can hurt your credit score.
- Prepay When Possible: Reduces total interest paid.
Final Thoughts
A 10 lakh personal loan can be a great financial support, but understanding your monthly EMI breakdown is crucial before you commit. Always calculate EMI, compare lenders, and choose the right tenure for your budget. By doing so, you can manage your finances smartly and reduce the interest burden.
FAQs
Q1: What is the EMI for 10 lakh loan for 5 years?
A: At 10% interest, your EMI will be around ₹21,247 per month.
Q2: How much total interest will I pay on a 10 lakh loan?
A: For a 5-year tenure at 10% interest, you will pay ₹2,74,820 as interest.
Q3: Does credit score affect EMI?
A: Yes, a higher credit score can get you lower interest rates, reducing your EMI.
Q4: Can I prepay my personal loan?
A: Most banks allow prepayment after a certain lock-in period. This helps reduce your interest burden.
Q5: Which bank offers the lowest EMI for a 10 lakh personal loan?
A: It depends on your eligibility and credit score. Always compare offers from different banks before applying.
Disclaimer: This article is for general information only. The interest rates and terms mentioned in it depend on the policies of the bank and NBFC. These may change from time to time. Before taking any type of loan, get complete information from your bank.