How to use this calculator
- Enter the loan amount, interest rate and tenure from the lender's offer.
- Enter the processing fee as a percentage of the loan; GST is added on top (18% unless you change it).
- Read the EMI and the true yearly cost, which counts the fee as well as the interest.
- Tick I may close the loan early to see what foreclosure saves after the lender's charge, or switch to Compare two loans.
How the EMI and the true cost are calculated
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1)
P is the loan amount, r the monthly rate (yearly rate ÷ 12 ÷ 100) and n the number of months. The true yearly cost is the rate at which the EMIs are worth exactly the money you receive after the fee and GST, multiplied by 12. It is the same idea as an APR.
Example:₹5,00,000 at 13% for 36 months: EMI₹16,847, interest ₹1,06,491, fee and GST ₹11,800, true yearly cost 14.68%.
Frequently asked questions
What is the true cost of a personal loan?
The interest plus the processing fee and the GST on it. A loan of ₹5,00,000 at 13% for 36 months costs ₹1,06,491 in interest; a 2% fee adds ₹11,800 with GST, and you receive only ₹4,88,200. Counting that, the true yearly cost is 14.68%, not 13%.
How much does the processing fee matter?
With no fee the true yearly cost equals the quoted rate, 13%. A 2% fee raises it to 14.68%, and a 4% fee to 16.42%. Fees weigh more on short loans, because they are spread over fewer months.
Which is cheaper: a lower rate with a higher fee, or the other way round?
Compare the true yearly cost. 13% with a 2% fee works out to 14.68%; 12% with a 3.5% fee works out to 14.96% over the same 36 months. Use “Compare two loans” above with the numbers in your sanction letters.
Should I take a longer tenure for a smaller EMI?
A longer loan lowers the EMI but raises the interest. At 13% on ₹5,00,000: 12 months means an EMI of ₹44,659 and ₹35,904 of interest; 60 months means ₹11,377 a month but ₹1,82,592 of interest.
Is it worth closing a personal loan early?
Usually, if you close it early in the term. Closing the example loan after 12 EMIs, with a 4% charge plus GST, saves ₹33,240 overall. Near the end there is little interest left to save: after 34 EMIs the same charge would cost ₹1,025 more than it saves. Check your loan agreement for the actual charge and any lock-in.