Quick answer
A ₹5 lakh personal loan at 12% for 3 years has an EMI of ₹16,607. With a 2% processing fee plus GST taken from the payout, you receive less but repay the full EMI, so the true yearly cost (APR) is about 13.7%, not 12%.
Key takeaways
- Compare personal loans by APR, which includes fees, not by the advertised rate.
- Pre-approved offers from your salary bank are often the cheapest.
- Personal loans are unsecured. Missed EMIs hurt your credit score quickly.
Personal loan EMI formula
EMI = P × r × (1 + r)n ÷ [(1 + r)n − 1]- P = loan amount
- r = monthly interest rate = annual rate ÷ 12 ÷ 100
- n = tenure in months
What is APR and why it matters
Lenders deduct the processing fee (plus 18% GST) from the amount they pay out, but calculate EMI on the full loan. The APR is the interest rate at which what you actually received equals the present value of all your EMIs. RBI requires lenders to show an annual percentage rate in the Key Fact Statement given before you sign.
Frequently asked questions
What is the EMI for a ₹2 lakh personal loan?
At 12% a year: ₹9,415 for 2 years, ₹6,643 for 3 years.
What is a Key Fact Statement (KFS)?
A standard summary RBI requires lenders to give before you sign a retail loan. It lists the APR, all fees, the repayment schedule and recovery terms. Always compare KFS documents between lenders.
Is EMI calculated on reducing balance?
Yes. Banks and NBFCs in India charge interest on the outstanding balance. Early EMIs are mostly interest, and later EMIs are mostly principal. The amortisation table above shows this split.
Does a longer tenure reduce EMI?
Yes, but you pay much more interest in total. A shorter tenure with a slightly higher EMI can save lakhs of rupees.
Sources & methodology
Formulas follow the standard methods used by Indian banks, fund houses and government schemes. Rates and tax rules were checked against official sources on 1 October 2026. Read our methodology.
This calculator gives an estimate for planning purposes. Actual returns, tax and eligibility depend on your situation and on product terms. It is not financial advice.