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Everyday Tools

Personal Loan Calculator

A personal loan is quick to get but expensive. The advertised rate is only part of the cost, because the processing fee and the GST on it are usually cut from the amount you receive. This calculator shows the EMI, the total interest and the effective interest rate once those fees are counted.

Last reviewed:

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Shows how much of your income the EMI takes.

Interest share17.6%
Monthly EMI
₹16,847
Total interest
₹1,06,491
Total repayment
₹6,06,491
Processing fee incl. GST
₹11,800
Amount you receive
₹4,88,200
Total cost of borrowing
₹1,18,291
Effective interest rate including fees
14.68%
  • The effective rate treats the fee as a cost you pay upfront, so it is higher than the quoted rate. Prepayment charges and insurance are not included.

Enter your monthly income to see how much of it the EMI would take, and compare lenders by their real cost.

How to use this calculator

  1. Enter the loan amount, interest rate and tenure in months.
  2. Enter the lender's processing fee and the GST rate on it.
  3. Optionally enter your monthly income.
  4. Read the EMI, total cost of borrowing and the effective rate.

Formula and variables

EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1) Fees = P × fee % × (1 + GST %) Amount received = P − Fees Effective rate = the monthly rate at which the EMIs repay the amount received, × 12

  • P - the sanctioned loan amount.
  • r - monthly interest rate (annual ÷ 12 ÷ 100).
  • n - number of monthly instalments.

The effective rate is found by solving for the rate numerically. It is similar to the IRR of the cash flows.

Worked example

A ₹5,00,000 personal loan at 13% for 36 months, with a 2% processing fee and 18% GST on the fee.

Inputs and results for the worked example
Rate and tenure13% for 36 months
Processing fee2% plus 18% GST
Monthly EMI₹16,847
Total interest₹1,06,491
Fees including GST₹11,800
Effective interest rate14.68%
  1. EMI = ₹16,847 for 36 months, so interest is 16,847 × 36 − 5,00,000 = ₹1,06,491.
  2. Fee = 2% of 5,00,000 = ₹10,000 plus 18% GST = ₹11,800, so you receive ₹4,88,200.
  3. Solving for the rate at which 36 EMIs of ₹16,847 repay ₹4,88,200 gives about 14.68% a year.

What changes the result

  • Credit score. A higher score usually earns a lower rate.
  • Fees. Processing fees, insurance add-ons and prepayment penalties raise the real cost.
  • Tenure. A longer tenure lowers the EMI but increases interest.
  • Existing EMIs. Lenders look at your total EMIs compared with income before approving.

Benefits and practical uses

  • See the real cost of a loan, not only the headline rate.
  • Compare offers fairly with the effective rate.
  • Check whether the EMI fits your income.

Assumptions and limitations

  • A fixed rate with equal monthly instalments on a reducing balance.
  • Fees are deducted from the amount you receive.
  • Insurance, late fees and foreclosure charges are not included.

Frequently asked questions

How is personal loan EMI calculated?

With the reducing-balance formula from the loan amount, monthly rate and number of months.

Why is the effective rate higher than the quoted rate?

Because the fee is cut upfront, you receive less than you repay on. The effective rate measures the cost on the money you actually get.

How much EMI is safe?

Many lenders prefer total EMIs under about 40 to 50 per cent of income. Lower is safer.

Is GST charged on personal loan interest?

No. GST applies to processing and other service fees, not to the interest.

Can I prepay a personal loan?

Often yes, but some lenders charge a prepayment fee. Check the loan agreement.

References

Page last reviewed on . This calculator gives estimates for planning only; it is not financial advice and not an offer from any lender.