What is EMI in a Personal Loan?
EMI (Equated Monthly Installment) is the fixed amount you pay every month to repay your loan. It includes:
- Principal Amount – the money you borrowed.
- Interest Amount – the cost of borrowing.
For a ₹5 lakh loan for 3 years, your EMI depends on the interest rate offered by the lender.
EMI Calculation for ₹5 Lakh Loan Over 3 Years
The EMI is calculated using the formula:
EMI = [P × r × (1+r)^n] / [(1+r)^n – 1]
Where:
- P = Loan Amount (₹5,00,000)
- r = Monthly Interest Rate (Annual Rate ÷ 12 ÷ 100)
- n = Loan Tenure in Months (3 years = 36 months)
Instead of complex math, you can use a Personal Loan EMI Calculator online for quick results.
Example EMI Ranges (for ₹5 Lakh Loan, 3 Years)
Here’s a quick idea of how EMI changes with interest rates:
| Interest Rate | Approx. EMI (₹) | Total Interest Paid (₹) | Total Repayment (₹) |
|---|---|---|---|
| 10% | ₹16,134 | ₹80,824 | ₹5,80,824 |
| 12% | ₹16,607 | ₹97,852 | ₹5,97,852 |
| 15% | ₹17,317 | ₹1,23,432 | ₹6,23,432 |
(Values are indicative, actual EMI depends on lender policies.)
Factors Affecting Your EMI
- Interest Rate: Higher the rate, higher the EMI.
- Tenure: Longer tenure reduces EMI but increases interest outgo.
- Credit Score: A good credit score can get you lower rates.
- Income Level: Lenders assess repayment capacity before approving.
Benefits of Knowing Your EMI in Advance
- Helps in better financial planning.
- Avoids chances of default or late payments.
- Allows you to compare lenders for the best deal.
Tips to Reduce EMI Burden
- Maintain a high credit score (above 750).
- Compare lenders for the lowest interest rates.
- Choose prepayment options to close the loan early.
- Select a tenure that balances EMI affordability with interest savings.
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.