How is personal loan EMI calculated in India?

EMI = P × r × (1+r)^n ÷ ((1+r)^n − 1), where P is the principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the tenure in months. Example: ₹5 lakh at 12% for 36 months → monthly rate = 1%, EMI = ₹5,00,000 × 0.01 × 1.01^36 ÷ (1.01^36 − 1) = ₹16,607.

What is the difference between flat rate and reducing balance rate on personal loans?

Flat rate: interest is calculated on the full original principal for the entire tenure. Reducing balance: interest is calculated only on the outstanding principal, which falls with each EMI. A flat rate of 12% is equivalent to approximately 21% on reducing balance (about 1.74× for a 36-month loan). Always compare personal loans on a reducing balance basis. Indian banks use reducing balance; some NBFCs and consumer finance companies still quote flat rates.

What is the lowest personal loan interest rate in India in 2026?

As of May 2026, the lowest personal loan interest rates start at 8.75% p.a. from Bank of Maharashtra and Axis Bank (for top-rated borrowers). SBI starts at 10%, HDFC and ICICI start at 9.99%, and IDFC First starts at 9.99%. NBFCs like Bajaj Finance and Tata Capital start around 11%. The rate you actually get depends on your CIBIL score (750+ gets the best rates), employer category, monthly income, and existing relationships with the bank.

What is FOIR and how does it affect personal loan eligibility?

FOIR (Fixed Obligation to Income Ratio) is the share of your monthly income committed to loan EMIs. Most Indian banks cap FOIR at 40–50% for personal loans. If your take-home income is ₹80,000 and you already pay ₹10,000 in other EMIs, your available EMI capacity at 40% FOIR is ₹32,000 − ₹10,000 = ₹22,000. This determines the maximum personal loan you can get. The Affordability tab in this calculator models this exactly.

Does prepaying a personal loan save interest?

Yes — on a reducing balance loan, prepaying the principal reduces the outstanding balance on which future interest is computed. A lump sum prepayment of ₹1 lakh in month 12 of a ₹5 lakh, 12%, 36-month loan saves approximately ₹14,000 in interest and cuts 5 months off the tenure. However, most banks charge 2–5% foreclosure fees; the Prepayment tab models net savings after these charges.

When does a personal loan balance transfer make sense?

A balance transfer makes sense when: (1) the new rate is at least 2–3% lower, (2) the switch costs (processing fee + foreclosure charge) are recovered in less than half the remaining tenure, and (3) you have enough tenure left to enjoy the savings. The Balance Transfer tab calculates net saving = (current total interest − new total interest) − switch costs, and the break-even month. If break-even is within the remaining tenure, the transfer is worth it.

What is effective APR on a personal loan and why does it matter?

The effective APR (Annual Percentage Rate) includes the processing fee in the cost of the loan, because the fee reduces the amount you actually receive while the EMI stays the same. Example: ₹5 lakh loan at 12%, 2% processing fee (₹10,000). You receive ₹4,90,000 but repay ₹5,16,252. This makes the effective APR approximately 13.6% instead of 12%. When comparing two lenders — one at 10% with 3% fee vs one at 11% with 0.5% fee — always compare on effective APR.

What CIBIL score do I need for the lowest personal loan rate?

Most banks in India reserve their lowest personal loan rates (9.99%–11%) for borrowers with CIBIL scores above 750. Scores between 700–749 typically attract rates of 12%–16%. Below 700, rates go above 18% if approved at all. Maintaining a CIBIL score above 750 by paying all EMIs and credit card bills on time, keeping credit utilisation below 30%, and avoiding multiple loan applications within 6 months are the key levers.

Loans

Personal Loan EMI Calculator

Four tools in one: EMI with flat vs reducing toggle, prepayment simulator, affordability check, and balance transfer analyser. Built for Indian borrowers in 2026.

Flat vs reducing balance Processing fee in APR Prepayment simulator Affordability / FOIR check Balance transfer analyser 25 lenders compared →

Loan amount

₹

Interest rate (p.a.)

Loan tenure (months)

Processing fee

Processing fee rate

Interest method

Monthly EMI ₹16,607

Principal ₹5.00 L

Total interest ₹97,858 20% of principal

Processing fee ₹10,000

Total cost of credit ₹6.08 L EMI × 36 + fee

Effective APR 13.41% incl. processing fee

Principal 82.3% ₹5.00 L

Interest 16.1% ₹97,858

Processing fee 1.6% ₹10,000

Amortisation schedule

Year	Opening balance	EMI paid	Principal	Interest	Closing balance
1	₹5.00 L	₹1.99 L	₹1.47 L	₹52,078	₹3.53 L
2	₹3.53 L	₹1.99 L	₹1.66 L	₹33,408	₹1.87 L
3	₹1.87 L	₹1.99 L	₹1.87 L	₹12,371	₹0
Total	—	₹5.98 L	₹5.00 L	₹97,858	₹0

How to calculate personal loan EMI

Every personal loan EMI in India is computed using the reducing balance formula — interest is charged only on the outstanding principal, not on the original amount:

EMI = P × r × (1+r)ⁿ ÷ ((1+r)ⁿ − 1)

Where: P = principal loan amount, r = monthly interest rate (annual rate ÷ 12 ÷ 100), n = tenure in months. For a ₹5 lakh loan at 12% p.a. for 36 months: r = 0.01, EMI = ₹16,607/month, total interest = ₹97,852.

Flat rate vs reducing balance: the hidden markup

Some NBFCs and consumer finance companies still quote personal loan rates as flat rate, where interest is calculated on the full original principal for the entire tenure — even though your outstanding balance is falling every month.

Flat rate (12% quoted)

EMI = (P + P × r_flat × t) ÷ n

For ₹5L, 12%, 36m: EMI = ₹19,444/mo

Effective reducing rate ≈ 21.5%

Reducing balance (12% quoted)

EMI uses standard reducing formula

For ₹5L, 12%, 36m: EMI = ₹16,607/mo

Exactly 12% — what it says

The rule of thumb: a flat rate of X% is roughly 1.74× that on reducing balance for a 36-month loan. Use the Flat rate toggle in the EMI tab to see both side-by-side. Always negotiate with lenders in reducing balance terms.

How processing fee affects your true cost

Banks and NBFCs deduct the processing fee upfront from the disbursed amount, but your EMI is computed on the full sanctioned amount. This is why comparing two loans on nominal rate alone is misleading:

Lender A: 10% p.a., 3% processing fee → effective APR ≈ 12.4% on a 36-month loan
Lender B: 11% p.a., 0.5% processing fee → effective APR ≈ 11.4%
Lender B is cheaper despite a higher nominal rate

Enter the processing fee in the EMI tab and the calculator computes effective APR using the IRR (Newton's method). Use this number to compare lenders apples-to-apples.

When to prepay your personal loan

Personal loan prepayment almost always makes sense if you have surplus cash, because:

Personal loans are non-deductible for income tax — there's no 24(b) or 80C benefit to lose.
Rates are high (10–24%), so every prepaid rupee earns a guaranteed 10–24% "return".
Foreclosure charges (typically 2–5% of outstanding) erode part of the saving — model with the Prepayment tab.

If you choose to reduce EMI (not tenure), you free up monthly cash flow — useful if you're income-constrained. If you choose to reduce tenure, you save more interest in absolute terms.

What is FOIR and how banks use it

FOIR (Fixed Obligation to Income Ratio) = (all monthly EMIs) ÷ monthly income. RBI guidelines suggest a maximum of 50%; responsible lenders use 40% as a practical limit. If your take-home is ₹80,000 and existing EMIs are ₹15,000:

At 40% FOIR: available EMI = ₹80,000 × 40% − ₹15,000 = ₹17,000/month
At ₹17,000/month, 12% p.a., 36 months → max loan ≈ ₹5.12 lakh

The Affordability tab calculates this automatically. Adjust the FOIR slider to see what different lenders will allow.

Current personal loan rates in India (May 2026)

Rates vary by CIBIL score, employer category, income, and banking relationship. Best rates (for 750+ CIBIL, salaried in top-tier company):

Bank of Maharashtra, Axis Bank: from 8.75%
HDFC Bank, ICICI Bank, IDFC First: from 9.99%
SBI: from 10.00% (MCLR-linked)
Kotak Mahindra, Tata Capital: from 10.99%
Bajaj Finance, Fullerton: from 11–12% (higher for self-employed)

See the full rates comparison table → with official source links for all 25 lenders.

Personal loan EMI reference table (36 months)

Monthly EMI for common loan amounts at four indicative rates, for a 36-month tenure. These are reducing-balance EMIs with no processing fee. Use the calculator above for your exact scenario.

Loan amount	10% p.a.	12% p.a.	14% p.a.	18% p.a.
₹1 lakh	₹3,227/mo	₹3,321/mo	₹3,418/mo	₹3,615/mo
₹2 lakh	₹6,453/mo	₹6,643/mo	₹6,836/mo	₹7,230/mo
₹3 lakh	₹9,680/mo	₹9,964/mo	₹10,253/mo	₹10,846/mo
₹5 lakh	₹16,134/mo	₹16,607/mo	₹17,089/mo	₹18,076/mo
₹7 lakh	₹22,587/mo	₹23,250/mo	₹23,924/mo	₹25,307/mo
₹10 lakh	₹32,267/mo	₹33,214/mo	₹34,178/mo	₹36,152/mo
₹15 lakh	₹48,401/mo	₹49,821/mo	₹51,266/mo	₹54,229/mo
₹20 lakh	₹64,534/mo	₹66,429/mo	₹68,355/mo	₹72,305/mo

Total interest for a ₹5 lakh loan: ₹80,824 at 10%, ₹97,852 at 12%, ₹1,15,204 at 14%, ₹1,50,736 at 18%. Every 2% rate cut saves you roughly ₹17,028 over the loan term.

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Frequently asked questions

Is personal loan interest tax deductible?

Generally, no — personal loan interest has no income tax deduction in India. The only exception: if you can prove the loan was used for a business purpose (for self-employed borrowers), you may claim it as a business expense under Section 37(1). For salaried employees, there is no deduction available under any head, including 80C, 24(b), or 80E.

What is the maximum tenure for a personal loan in India?

Most banks and NBFCs offer personal loans up to 60 months (5 years). Bajaj Finance and Aditya Birla Finance extend to 84 months. Axis Bank offers up to 84 months. Longer tenures mean lower EMIs but significantly higher total interest — a ₹5L loan at 12% costs ₹97K interest over 36 months but ₹1.93L over 84 months.

How does a balance transfer to a lower rate lender work?

You apply to a new lender who pays off your existing loan directly. You then repay the new lender at the lower rate. The switch costs are: (1) foreclosure charges on the old loan (2–5% of outstanding), and (2) processing fee on the new loan (1–4%). These must be recovered from the interest saved. Use the Balance Transfer tab to compute the break-even month — if it's within your remaining tenure, transfer.

Does my employer affect personal loan interest rate?

Yes, significantly. Banks maintain a "salary account / employer category" list: Central/state government and PSU employees get the lowest rates (often 0.5–1% below the advertised rate). MNC and listed company employees are in "Category A". Smaller private company employees may get 1–3% higher rates than advertised. HDFC, ICICI, and Axis explicitly publish employer-category rate grids.

What is the minimum CIBIL score needed for a personal loan?

Most banks require a minimum CIBIL score of 700–720. Below 700, mainstream banks will decline the application. Some NBFCs (Bajaj Finance, Fullerton, IIFL) lend down to 650 CIBIL but at higher rates (18–36%). A score of 750+ gets you the best advertised rate. Scores above 800 may unlock special pre-approved offers.

Last updated 28 May 2026 · site changelog