Personal Loan Calculator

Three fields and a number

A personal loan is the plainest kind of borrowing there is. No collateral, no asset attached, no valuation. You get a lump sum, you pay it back in equal instalments, and the whole deal fits into three numbers.

So this calculator asks for three numbers and gives you back two.

That is deliberately small. It is the tool for when a lender has just quoted you something over the phone and you want to know, in about four seconds, whether the monthly figure is survivable. If you want the month by month schedule instead, the repayment calculator builds one, and if there is a processing fee in play, the personal loan EMI calculator factors it in.

Type the term the way it was quoted to you

Here is a small thing that saves a surprising amount of annoyance.

Lenders do not agree on how to express a tenure. A bank in India will tell you 36 months. A US lender will say three years. A short term facility might be quoted in weeks. Most calculators pick one and make you convert.

The dropdown next to the term field lets you type whichever one you were given. Years, months, weeks or days, and the calculator converts internally before doing anything else.

Two conversions worth knowing about, since they decide the answer. A year is treated as 365.25 days, which is the average length of a year once leap years are spread across it. A week is a seventh of that. So 36 months and 3 years give you an identical result, while 1096 days gives you something a hair different, because 1096 days is not exactly three calendar years.

Whatever unit you pick, the answer always comes back as a monthly payment, because that is how nearly every personal loan is actually collected.

What happens after you press Calculate

Three steps, and none of them are mysterious.

Step one. Your term becomes a number of years, then a number of months. Thirty six months becomes 3 years becomes 36 payments.

Step two. Your annual rate becomes a monthly one. Thirteen percent a year becomes 13 divided by 12 divided by 100, which is 0.01083333 a month.

Step three. Both go into the standard amortising payment formula:

M = P × [ r(1 + r)ⁿ ] / [ (1 + r)ⁿ - 1 ]

Then total interest is simply the payment times the number of payments, minus what you borrowed. Everything you hand back beyond the principal is interest, by definition.

One thing this formula quietly assumes, and it is worth saying out loud: interest is charged on the balance you still owe, not on the original amount. That is called a reducing balance basis and it is what almost every real personal loan uses. The alternative, flat rate, is a different and much more expensive animal, and there is more on it below.

Four lakh over three years

Say you have been offered 4,00,000 over 36 months at 13 percent a year.

The monthly rate is 0.01083333. The number of payments is 36.

So the loan costs you 85,192.91 to have. Put another way, you are paying about 21 paise of interest for every rupee you borrowed, spread over three years.

That last framing is worth adopting. A rate of 13 percent sounds like it should cost 13 percent. It does not, because you are borrowing the money for three years rather than one. Dividing the total interest by the loan amount gives you a number that is much harder to fool yourself about.

What stretching the tenure actually costs

Every lender, at some point in the conversation, will offer to lower your monthly payment by giving you a longer tenure. It sounds like a favour. Here is the same 4,00,000 at the same 13 percent, at four different tenures.

Read the two ends against each other. Going from 24 months to 60 months drops your monthly payment by 52 percent, which is genuinely a lot of breathing room. It also increases what you pay in interest by 159 percent. Nearly ninety thousand extra, on the same loan, at the same rate.

Neither column is the right answer on its own. A payment you cannot make is not a bargain, and defaulting costs far more than interest ever will. But the trade should be a decision you make with both numbers in front of you, rather than one you drift into because the smaller monthly figure felt more comfortable in the moment.

A reasonable habit: pick the shortest tenure whose payment you could still manage in a bad month, not the shortest one you could manage in a good one.

The rate you are quoted and the rate you pay

This calculator takes one rate and treats it as a reducing balance annual rate. Most of the time that is exactly what you were quoted. Sometimes it is not, and the gap is large enough to matter.

Flat rate versus reducing balance

Some lenders, particularly for smaller consumer loans, quote a flat rate. Under flat rate, interest is charged on the full original amount for the whole tenure, even though your balance is shrinking. A 7 percent flat rate over three years is roughly equivalent to a 13 percent reducing balance rate. Same loan, same cash, wildly different sounding numbers.

So the first question to ask any lender is not what the rate is. It is whether that rate is flat or reducing.

Fees are not in the rate

The rate prices the money. It does not price the processing fee, the documentation charge, or the insurance a lender might bundle in. The measure that includes those is the APR, and as the Consumer Financial Protection Bureau puts it, the APR is the interest rate plus the additional fees the lender charges. That is why the APR on your paperwork is usually the larger number.

Which gives the rule for comparing offers: APR against APR. Never an APR from one lender against an interest rate from another.

Two things to check before you sign

What actually lands in your account. If the loan is 4,00,000 and the processing fee is 2 percent, you receive 3,92,000 but pay interest on the full 4,00,000. In India there is also GST at 18 percent on that fee. If you need a specific amount in hand, borrow enough to cover the fee, or you will end up short of the thing you borrowed for.

What it costs to get out early. Prepayment and foreclosure charges vary a great deal, and some lenders lock you in for the first several months. Since interest on a reducing balance loan is heaviest at the start, the ability to prepay in year one is worth real money, and it is worth asking about before you sign rather than after.

One more time

Type the amount, the term in whatever unit you were given, and the annual rate. The calculator converts everything to months, runs the standard amortising payment formula, and hands back your monthly figure and the total interest.

Then look at the total interest as a share of what you borrowed, because that number is much harder to talk yourself past than a percentage rate is. On 4,00,000 at 13 percent over three years it is 21 percent of the loan. Stretch the same loan to five years and it becomes 36 percent.

And check two things that never appear in any of this arithmetic. Whether the quoted rate is flat or reducing, and what fees come out before the money reaches you.

Hope that gives you something solid to take into the conversation with your lender. If a lender's figure disagrees with ours by more than a rounding difference, we would genuinely like to hear about it.

Questions people ask

Does it matter whether I enter 3 years or 36 months?

No, both convert to 36 monthly payments and give an identical answer. Days and weeks are converted using a 365.25 day year, so those can land a fraction away from the whole month equivalent.

How do I know if my rate is flat or reducing?

Ask, and get it in writing. A quick smell test: if the quoted rate seems unusually low for an unsecured loan, it is often a flat rate. Roughly speaking, a flat rate over a three year tenure works out near double as a reducing balance rate.

Why is the total interest so much larger than the rate suggests?

Because the rate is per year and you are borrowing across several years. A 13 percent annual rate over three years costs about 21 percent of the loan in total, not 13 percent.

Does this include the processing fee?

No, it prices the interest only. For the cost with an upfront fee folded in, the personal loan EMI calculator works out the effective APR.

Can I see how each payment splits between interest and principal?

Not on this tool, it gives you the headline figures only. The repayment calculator prints the full month by month schedule with a payoff date.

What if my rate changes during the loan?

Then treat this as a snapshot at today's rate. Most personal loans in India are fixed rate, so the snapshot usually holds, but a floating rate loan will be redrawn each time the rate resets.

Which currency does it use?

Whichever one you type. There is no currency in the maths, only ratios, so the answer comes back in the same units you put in.

References

A note on where the outside claims here come from. The distinction between an interest rate and an APR, and the instruction to compare APR with APR rather than mixing the two, is the Consumer Financial Protection Bureau's, and it rests on the disclosure duties the Truth in Lending Act places on US lenders. For borrowers in India, the equivalent protection is the Reserve Bank of India's Key Facts Statement requirement, which obliges every lender to hand you an all-inclusive annual percentage rate before you sign, and that document is the one to compare our figure against.

1. Consumer Financial Protection Bureau, What is the difference between a loan interest rate and the APR? https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-loan-interest-rate-and-the-apr-en-733/
2. Reserve Bank of India, Key Facts Statement (KFS) for Loans and Advances, circular RBI/2024-25/18 dated 15 April 2024, mandating disclosure of an all-inclusive APR for all retail and MSME term loans. https://rbidocs.rbi.org.in/rdocs/notification/PDFs/CIRCULARKFS1504242AE2500BAF494C2A82442B0B642705C1.PDF
3. Consumer Financial Protection Bureau, Auto loan answers: key terms, on amortisation and how interest is charged against a reducing balance. https://www.consumerfinance.gov/consumer-tools/auto-loans/answers/key-terms/
4. Cornell Law School, Legal Information Institute, Compound interest, Wex legal dictionary. https://www.law.cornell.edu/wex/compound_interest