How EMI is calculated
An equated monthly instalment (EMI) repays a loan in equal monthly amounts. The formula is EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan amount, r the monthly interest rate (annual rate ÷ 12) and n the number of months. For ₹30 lakh at 8.5% over 20 years, the EMI is about ₹26,035.
Each month, interest is charged on the outstanding balance and the rest of the EMI repays principal. In the early years most of the EMI is interest; towards the end most of it is principal. The schedule shows this split month by month, so you can see exactly how the balance comes down.
Floating rates: keep the EMI or the tenure?
Most home loans in India are floating-rate loans linked to an external benchmark such as the RBI repo rate, so the rate changes during the loan. When it does, banks usually keep the EMI the same and change the number of remaining EMIs; some let you keep the tenure and change the EMI instead. The template does either. If a rate rise makes the EMI smaller than the month's interest, the Summary flags it – that is the point to ask the lender to raise your EMI.
Why part-prepayments save so much
A prepayment goes straight to principal, so every later month's interest is lower. Paid early in the loan it can cut years off the tenure. In the sample, prepayments of ₹2 lakh and ₹3 lakh in the second and fourth years, together with the rate changes, close a 20-year loan more than five years early and save over ₹12 lakh of interest. Banks generally don't charge prepayment or foreclosure penalties on floating-rate loans taken by individuals, but check your loan agreement.
Using the schedule in your accounts
For a business, the loan has to be split in the balance sheet between the amount repayable within twelve months (shown under current liabilities as current maturities of long-term borrowings) and the rest (non-current). The Pro edition works this out for any balance-sheet date and gives interest and principal for each financial year, which is also what you need to check the lender's interest certificate. For a self-occupied house, interest up to ₹2 lakh and principal within the ₹1.5 lakh investment limit are deductible only in the old tax regime.
Free vs Pro
The free edition gives the full schedule with rate changes and prepayments. The Pro edition adds the financial-year and balance-sheet working, and a comparison of three loan offers that includes processing fees and shows the effective annual rate (APR) – the true cost of borrowing.
Written by Prakash Bagchi, finance professional and founder of PB Lab. Last reviewed .