Personal loan EMI.
Monthly EMI
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Total interest
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Total payable
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Your breakdown
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Worked example
Suppose you take an unsecured personal loan of Rs 5,00,000 at 14 percent annual interest for 4 years. The monthly rate is 14 percent divided by 12, about 1.167 percent, and the tenure is 48 months. The EMI formula gives a monthly payment of about Rs 13,663. Across 48 months you repay roughly Rs 6,55,835, so the total interest is about Rs 1,55,835, which is close to 31 percent of the amount borrowed. Personal loans cost much more than home or car loans because they are unsecured, so the rate is higher and the tenure is shorter. On top of the EMI, lenders typically charge a one-time processing fee of 1 to 3 percent plus GST, which is deducted upfront and is not part of the figures here, so the real cost is a little higher than the interest alone.
How it is calculated
The EMI uses the standard reducing-balance formula: principal times the monthly rate times (1 plus rate) raised to the number of months, divided by that growth factor minus one. The monthly rate is the annual rate divided by 12 and the tenure is the number of years times 12. Total payable is the EMI multiplied by the number of months, and total interest is that figure minus the loan. When comparing personal loan offers, always check whether the quoted rate is on a reducing balance, since a flat rate of the same number works out far more expensive. Also add the processing fee and any prepayment or foreclosure charges to judge the true cost. Because the rate is high, even a small reduction in rate or tenure noticeably lowers the interest you pay.