How the EMI on ₹10 lakh is worked out
A fixed-rate EMI comes from the reducing-balance formula: EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1). P is the loan amount, n is the tenure in months and r is the monthly rate, which is the annual rate divided by 12 and then by 100. Each month, interest is charged only on the balance still owed.
For ₹10,00,000 at 9.5% over 5 years, r = 9.5 ÷ 12 ÷ 100 = 0.0079167 and n = 60. (1 + r)^60 comes to about 1.605009, so EMI = 10,00,000 × 0.0079167 × 1.605009 ÷ 0.605009 ≈ ₹21,002. Over 60 months you repay ₹12,60,112, of which ₹2,60,112 is interest.
Tenure against total interest
A longer tenure lowers the EMI, but you pay interest for more months. At 9.5%, stretching ₹10 lakh from 3 to 7 years cuts the EMI from ₹32,033 to ₹16,344, which is ₹15,689 less each month. Total interest rises from ₹1,53,186 to ₹3,72,894, about 2.4 times as much.
Early EMIs are mostly interest. In the first month of a 5-year loan at 9.5%, ₹7,917 of the ₹21,002 EMI is interest and ₹13,085 repays principal. That is why a prepayment early in the loan saves more interest than the same amount paid near the end.
How much income lenders look for
Lenders check how much of your income already goes to loans. A common measure is FOIR, the fixed obligation to income ratio: all your EMIs, including the new one, as a share of your net monthly income. A limit of 40% to 50% is often cited as a typical guideline, but it is not a rule. Each lender sets its own and may vary it with your income, employer and credit history.
At 9.5% over 20 years, the EMI on ₹10 lakh is ₹9,321. For that to be 40% of take-home pay, with no other EMIs, you would need a net monthly income of about ₹23,303. Over 5 years the EMI is ₹21,002, which at 40% needs about ₹52,505 a month. Existing EMIs, such as a car loan or a credit card EMI, raise the income needed.
What these figures leave out
The tables assume one fixed rate for the whole tenure. In practice:
- The rate columns are scenarios, not current offers. Your rate depends on the lender, the type of loan and your credit profile.
- Processing fees, insurance and other charges are not included.
- On a floating-rate loan, a rate change usually alters the tenure, the EMI or both.
- Lenders round the EMI, and the first month can include interest for a part period, so your schedule may differ slightly.
- Prepayments are not modelled. The EMI calculator above lets you try your own rate and tenure.