Personal Loan Calculator

Why ₹5 lakh sanctioned becomes ₹4,88,200 in your account

A personal loan is priced twice. The interest rate is printed large on the offer. The processing fee, 1 to 3 percent of the loan plus 18 percent GST on the fee, is deducted before disbursement. So the bank sanctions ₹5 lakh, credits ₹4,88,200, and then charges you interest and EMIs on the full ₹5 lakh, including the ₹11,800 you never saw.

That is not a trick, exactly; every bank and NBFC does it and the Key Facts Statement discloses it. But it means the quoted rate understates the cost, and the shorter the tenure, the more it understates. This calculator works out the rate you are actually paying on the money you actually received, which is the number to compare two offers on.

The four inputs, and the one that hides

• Loan amount is the sanctioned figure, the one the EMI is computed on.
• Interest rate in percent p.a., reducing balance. If a lender quotes a flat rate, see the section on flat rates below before typing it in.
• Tenure in years, in half-year steps. Personal loans run 1 to 5 years; a few banks go to 7 for salaried customers with a 750-plus CIBIL.
• Processing fee as a percentage of the loan. The calculator adds 18 percent GST on its own, so enter the fee the bank quotes (2 percent), not the fee with tax (2.36 percent). Some banks quote a flat ₹999 or ₹2,999 instead; convert it to a percentage of your loan.

What a ₹5 lakh loan at 12 percent really costs

EMI        = P × i × (1+i)^n / ((1+i)^n - 1)     i = 12 / 1200, n = 48, P = 5,00,000
fee        = P × 2% × 1.18                        = 11,800
disbursed  = P - fee                              = 4,88,200
effective  = the annual rate at which 48 EMIs are worth exactly 4,88,200 today

Monthly EMI	₹13,167
Amount you actually receive	₹4,88,200
Processing fee incl. GST	₹11,800
Total interest	₹1,32,012
Total cost of borrowing	₹1,43,812
Effective annual rate	13.29%
Tenure	48 months

The effective rate answers one question: if a lender had handed you ₹4,88,200 with no fee and asked for the same 48 EMIs of ₹13,167, what rate would that be? Here, 13.29 percent. The fee has quietly added 1.29 points to a 12 percent loan.

Shorten the tenure and the same fee hurts more, because there are fewer months to spread it over:

Tenure	Monthly EMI	Effective annual rate
1 year	₹44,424	16.56%
2 years	₹23,537	14.42%
4 years	₹13,167	13.29%

Raise the fee to 3 percent (₹17,700 with GST) and the four-year loan’s effective rate climbs to 13.95 percent. Which is the comparison that matters in practice: a lender offering 11.5 percent with a 3 percent fee is effectively at 13.44 percent, while one offering 12 percent with a 1 percent fee is at 12.64 percent. The “cheaper” rate is the dearer loan.

Since October 2024, RBI requires every retail lender to hand you a Key Facts Statement with an annual percentage rate on it, fee included. That APR should sit close to the effective rate here. If it does not, ask what else they have added.

Flat rates, app loans and the pre-approved offer in your banking app

Three places the headline number misleads.

Flat rates. NBFCs, consumer-durable desks and a fair number of loan apps quote a flat rate, where interest is charged on the full ₹5 lakh for all four years, ignoring that you repay it month by month. On this loan, 12 percent reducing equals 6.60 percent flat. So a lender saying “6.5 percent flat” is not cheaper than a bank at 12 percent; they are the same loan. Use the EMI calculator to convert any flat quote before you enter it here.

App loans quoted monthly. “1.5 percent a month” is 18 percent a year, and the app’s processing fee is often the full 3 percent. At 18 percent for a year with a 2 percent fee, a ₹5 lakh loan runs at an effective 22.63 percent. Read the monthly figure as twelve times itself and then add the fee.

Pre-approved offers. The offer in your HDFC or ICICI app is pre-approved because the bank has already seen your salary credits; it is not pre-negotiated. The rate is usually a point or two above what the same bank gives a walk-in customer who asks, and the fee is at the top of the range. Treat it as a starting quote. Your salary-account bank, a second bank, and a check of the take-home salary calculator to see what EMI actually fits are the three things worth doing before accepting it.

Prepaying, foreclosing and what it does to your CIBIL

Almost every personal loan has a lock-in of 6 to 12 EMIs before you may prepay at all, and a foreclosure charge of 2 to 5 percent of the outstanding plus GST after that. Part-prepayment usually has a minimum, often one or two EMIs’ worth, and a cap on how many times a year.

RBI’s 2025 direction on prepayment charges removes them, from 1 January 2026, for floating-rate loans to individuals for non-business purposes. Most bank personal loans are fixed rate, so the charge stays; a few lenders do offer floating-rate personal loans, and on those the charge should be gone. Check which kind yours is on the sanction letter before you count on a free exit.

On CIBIL: every application is a hard enquiry, and four applications in a fortnight while you shop for the best rate will cost you points at exactly the moment you need them. Apply to one or two lenders, not five. Paying every EMI on time for four years does more for your score than anything else you can do. Closing early is neutral. What hurts, and hurts for years, is a “settled” status, where the lender accepts less than the full amount; if you are struggling, restructure or refinance rather than settle.

A personal loan is the wrong instrument for a car or a house. The car loan calculator and the home loan calculator model secured loans at half the rate.