EMI Calculator

Note: This calculator provides an estimate based on the information you provide. Actual loan terms may vary based on lender policies, fees, and other factors.

What is Term Loan?

A term loan is a financial product where borrowers receive a lumpsum amount and repay it over a fixed period, typically ranging from 1 to 10 years. Term loans can be either secured (backed by collateral) or unsecured, depending on the lender's requirements and the borrower's profile. The loan amount is determined based on the borrower's creditworthiness, income stability, and repayment capacity.

Interest rates for term loans are fixed or floating, with monthly repayments made through Equated Monthly Installments (EMIs).

These loans provide predictable repayment schedules, making them ideal for planned expenses like education, home renovation, or business expansion. Term loans offer higher loan amounts compared to credit cards or personal lines of credit, with potentially lower interest rates for borrowers with good credit histories.

How is Term Loan EMI Calculated?

Term loan EMI is typically calculated on a monthly basis using the following method:

Example Calculation:

  • Loan Amount: ₹5,00,000
  • Loan Tenure: 5 years (60 months)
  • Annual Interest Rate: 12%
  • Monthly Interest Rate: (12% ÷ 12) = 1% or 0.01
  • EMI Formula: P × r × (1+r)^n ÷ [(1+r)^n - 1]
  • Where P = Principal, r = Monthly interest rate, n = Number of installments
  • EMI Calculation: ₹5,00,000 × 0.01 × (1.01)^60 ÷ [(1.01)^60 - 1] = ₹11,122
  • Total Amount Payable: ₹11,122 × 60 = ₹6,67,320
  • Total Interest Payable: ₹6,67,320 - ₹5,00,000 = ₹1,67,320

Benefits of a Term Loan

  • Access to large lumpsum amounts for major expenses or investments
  • Fixed repayment schedule providing predictability for budgeting
  • Potentially lower interest rates compared to credit cards
  • Longer repayment periods reducing monthly payment burden
  • Opportunity to build credit history with consistent repayments

Disadvantages of a Term Loan

  • Fixed obligation regardless of changes in financial situation
  • Potential prepayment penalties for early loan settlement
  • Long-term commitment that may limit future borrowing capacity