How We Calculate

Loan EMI

Standard reducing-balance EMI, as used by Indian banks:

EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)

P = loan amount, r = annual rate ÷ 12 ÷ 100, n = tenure in months

Each month, interest is charged on the outstanding balance and the rest of the EMI repays principal. At a 0% rate (for example a no-cost EMI), the EMI is simply the loan amount divided by the number of months.

Example: ₹50,00,000 at 8.5% for 20 years → EMI ₹43,391, total interest ₹54,13,879.

Loan prepayment

The prepayment calculator builds the loan month by month. A prepayment reduces the outstanding principal in the month it is made, and then one of two things happens:

• Reduce tenure: the EMI stays the same, so the loan ends earlier.
• Reduce EMI: the EMI is recalculated with the standard formula over the remaining original tenure.

One-time, recurring (yearly, half-yearly or quarterly) and custom-timeline prepayments all use the same month-by-month schedule. "Start after 0 years" applies the prepayment before the first EMI. Interest saved is the difference in total interest between the schedules with and without prepayment.

Example: ₹50,00,000 at 8.5% for 20 years, ₹5,00,000 prepaid after the 12th EMI: reducing tenure saves ₹16,03,691 in interest and closes the loan 4 years early; reducing EMI instead saves ₹5,09,408.

Under RBI rules, banks can't charge prepayment penalties on floating-rate term loans taken by individuals. Fixed-rate loans may carry a fee, which this calculator does not include. Check your loan agreement.

Step-up EMI

The step-up EMI calculator starts from the standard EMI and adds a fixed amount to it at the start of each year after the year you choose. The schedule is run month by month until the balance reaches zero, which gives the new closing date and total interest.

The one-time increase mode keeps the higher EMI constant. For a target closing year, the required EMI is the standard EMI formula with the months remaining until that year.

Home loan eligibility

Banks cap all your EMIs together at a share of income called FOIR (fixed obligations to income ratio), so existing EMIs come straight out of the EMI available for a new home loan:

Max EMI  = monthly income × FOIR − existing EMIs
Max loan = Max EMI ÷ (EMI per ₹1 lakh) × ₹1,00,000

The conservative and optimistic estimates use a FOIR 15% lower and 18% higher than the one you choose (capped at 70%).

Example: ₹1,00,000 monthly income, ₹20,000 existing EMIs, 50% FOIR, 9% for 20 years → max EMI ₹30,000 and max loan ₹33,34,349. Banks also cap the loan at 75–90% of the property value and adjust for credit score; those limits are not modelled.

SIP and step-up SIP

SIP instalments are treated as invested at the start of each month, the convention used by AMFI and most Indian SIP calculators:

Future value = P × ((1 + i)^n − 1) ÷ i × (1 + i)

P = monthly SIP, i = expected annual return ÷ 12 ÷ 100, n = months

Example: ₹10,000 a month at 12% for 10 years → ₹23,23,391.

Step-up SIP raises the monthly amount each year (by a fixed amount or a percentage) and applies the same formula to each year's instalments. The required-SIP calculator searches for the monthly amount whose future value reaches your target.

Lumpsum

Future value = P × (1 + r)^t      (r = annual return, t = years)

Example: ₹1,00,000 at 12% for 10 years → ₹3,10,585. Inflation-adjusted ("today's") values divide by (1 + inflation)^t.

Fixed deposit

Maturity = P × (1 + r ÷ n)^(n × t)

n = compounding periods per year (quarterly = 4, the default for Indian bank FDs)

Example: ₹1,00,000 at 7% for 5 years, compounded quarterly → ₹1,41,478. Results are before tax and TDS.

Prepay vs invest

The prepay vs invest calculator runs two month-by-month scenarios over the loan tenure. In one, your surplus (monthly or one-time) goes into prepaying the loan; in the other, it is invested at your expected return, compounded monthly at the annual rate ÷ 12 and invested at the end of each month. It compares interest saved with investment growth and the resulting net worth, before taxes.

EMI vs rent

The EMI vs rent calculator follows two households month by month. The buyer pays the down payment, buying costs, EMI and maintenance, and owns a home that appreciates at your chosen rate. The renter pays rent that rises at your chosen rate and invests the down payment and buying costs (less the security deposit). In any month, whichever household spends less invests the difference. Property value, rent and investments grow smoothly through the year at the equivalent monthly rate of each annual rate. Net worth is home equity plus investments for the buyer, and investments plus the security deposit for the renter.

Emergency fund

Monthly need = essential expenses × 1.5 + EMIs
Target       = monthly need × months of cover

The 1.5× adds a 50% buffer for irregular costs. Months of cover depend on income stability: 3 (very stable), 6 (stable), 9 (moderate) or 12 (unstable), each with a suggested split between cash, liquid funds and FDs.

Children's education

Today's cost grows at 9% a year (education inflation) until the goal year. Existing savings grow at 11% a year, and monthly savings use the SIP formula above at 11%. The shortfall is converted back into the monthly SIP needed to close it. Both rates are fixed assumptions; premium institutions have historically seen higher fee inflation.

What we don't model

• Taxes: home loan deductions (Section 24(b), 80C), the old vs new tax regime, capital gains tax on investments and TDS on FDs are not included unless a page says so.
• Interest rate changes: floating rates are assumed constant for the whole tenure.
• Fees: processing fees, prepayment fees on fixed-rate loans and insurance premiums are not included.
• Returns: investment returns are your assumption, not a forecast. Market returns vary year to year.
• Rounding: lenders round EMIs and interest differently, so expect small differences of a few rupees.

These calculators are for planning and education, not financial advice. For decisions involving large amounts, confirm the numbers with your lender and a SEBI-registered investment adviser.