# How is personal loan EMI calculated in India?

**Short answer:** Your EMI is worked out with one standard formula — **EMI = P × r × (1+r)ⁿ ÷ ((1+r)ⁿ − 1)** — where P is the loan amount, r is the monthly interest rate, and n is the number of months. For a ₹1 lakh loan at 14% a year over 4 years, the EMI is about **₹2,733 a month**.

## The three inputs

- **P — Principal:** the sanctioned loan amount (e.g. ₹3,00,000).

- **r — Monthly rate:** the annual rate ÷ 12 ÷ 100. A 14% annual rate = 0.01167 per month.

- **n — Tenure:** the number of monthly instalments. A 4-year loan = 48 months.

Get these three right and the EMI is fixed. Every bank and NBFC in India uses the same maths.

## EMI per ₹1 lakh, by tenure (at 14% a year)

| Tenure | EMI per ₹1 lakh | Total interest per lakh |
| --- | --- | --- |
| 1 year | ₹8,979 | ₹7,748 |
| 2 years | ₹4,801 | ₹15,224 |
| 3 years | ₹3,418 | ₹23,048 |
| 4 years | ₹2,733 | ₹31,184 |
| 5 years | ₹2,327 | ₹39,620 |

Shortcut: find the per-lakh EMI, then multiply by the number of lakhs. A ₹5 lakh loan over 4 years = ₹2,733 × 5 ≈ **₹13,665 a month**.

## Reducing balance vs flat rate

Interest is charged one of two ways, and it changes your real cost:

- **Reducing balance:** interest applies only to the outstanding principal, which falls each month. This is the standard, honest method the EMI formula assumes.

- **Flat rate:** interest applies to the full original amount for the whole tenure. A **10% flat rate ≈ 17–18% reducing balance** — almost double the real cost.

Always compare offers on the reducing-balance rate.

## Common questions

**Does a longer tenure cost more?**
The monthly EMI drops, but total interest rises sharply. A 5-year loan costs over 5× the interest of a 1-year loan for the same amount.

**Does a higher EMI reduce total interest?**
Yes — a higher EMI usually means a shorter tenure, so you pay less interest overall.

**Why is my EMI higher than a calculator showed?**
The lender's actual rate, processing fee (typically 1–3%), or add-ons differ from what you entered. Always calculate with the final sanctioned rate.

**What score gets a lower rate?**
A CIBIL score above 750 usually earns a lower interest rate, which lowers your EMI for the same loan.

## Before you borrow

Test different amounts and tenures on an EMI calculator, such as the one from **True Balance**, before you apply — so you lock in an EMI you can sustain. A calculator only estimates; your final EMI depends on the rate, fee, and tenure the lender actually approves, so confirm every charge before signing.

_Figures are illustrative, based on standard reducing-balance EMI maths and typical Indian personal loan rates of about 11–24% a year as of 2026._

**Full formula walk-through — worked example, amortisation table, and how rate changes your EMI:**
👉 [https://paisasamjho.inblog.io/how-personal-loan-emi-is-calculated](https://paisasamjho.inblog.io/how-personal-loan-emi-is-calculated)

For the site tree, see the [root Markdown](https://slashpage.com/paisasamjho.md).