What is EMI?
EMI (Equated Monthly Installment) is the fixed monthly payment that you make to the bank or lender until your loan is fully repaid. It includes both principal (the loan amount) and interest (the lender’s charge).
The formula used for EMI calculation 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 = Principal Loan Amount (₹40,00,000)
- R = Monthly Interest Rate (Annual rate ÷ 12 ÷ 100)
- N = Loan Tenure (in months = 7 × 12 = 84)
EMI for ₹40 Lakh Loan (7 Years)
Your actual EMI depends on the interest rate charged by the bank. Here’s an estimate:
| Interest Rate | Approx. EMI (per month) | Total Payable (7 Years) | Interest Payable |
|---|---|---|---|
| 8% | ₹62,741 | ₹52.7 lakh | ₹12.7 lakh |
| 9% | ₹64,431 | ₹54.1 lakh | ₹14.1 lakh |
| 10% | ₹66,145 | ₹55.6 lakh | ₹15.6 lakh |
| 11% | ₹67,885 | ₹57.0 lakh | ₹17.0 lakh |
| 12% | ₹69,650 | ₹58.5 lakh | ₹18.5 lakh |
As interest rate increases, your EMI and total repayment also go up.
Factors Affecting Your EMI
- Interest Rate – Higher rate = higher EMI.
- Loan Tenure – Longer tenure lowers EMI but increases total interest.
- Credit Score – A higher score gives you lower interest rates.
- Income & Employment – Stable income helps negotiate better terms.
- Type of Lender – Banks, NBFCs, and fintech companies may offer different rates.
How to Reduce Your EMI Burden
- Choose a longer tenure to reduce monthly EMI (but remember, total interest increases).
- Negotiate interest rates with your bank based on credit score.
- Make part-prepayments whenever possible to reduce outstanding principal.
- Compare lenders online before finalizing.
Benefits of Taking a Personal Loan
- No collateral required
- Quick approval and disbursal
- Flexible usage (any purpose)
- Simple EMI repayment structure
FAQs
1. What will be the EMI for a ₹40 lakh personal loan for 7 years?
Depending on the interest rate, it ranges between ₹62,000 – ₹70,000 per month.
2. Which bank gives the lowest EMI on a personal loan?
Banks like SBI, HDFC, and ICICI often provide competitive rates, but it depends on your credit profile.
3. Can I reduce my EMI after taking the loan?
Yes, by opting for balance transfer, part-prepayment, or tenure extension.
4. What is the minimum CIBIL score required for a personal loan?
Generally, 750+ is considered a good score for lower interest rates.
5. Is it good to take a 7-year tenure for a personal loan?
A 7-year tenure lowers EMI but increases total interest cost. It’s best if you want lower monthly burden.
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.