EMI calculator
Monthly instalment on a reducing balance, with the full schedule and the total interest you will actually pay.
Loan details
Rs 29,205 a monthover 15 years, at 11.5% reducing
What it costs
| Principal | Rs 25,00,000 |
|---|---|
| Total interest | Rs 27,56,854 |
| Total payable | Rs 52,56,854 |
If the same number were quoted flat
| Interest, flat | Rs 43,12,500 |
|---|---|
| Difference | Rs 15,55,646 |
| Month | Payment | Interest | Principal | Balance |
|---|
An estimate of the arithmetic, not an offer. Banks add service charges, insurance and processing fees that are not in this calculation, and the rate on most Nepali loans is variable. Ask your bank for the full schedule before you sign.
Reducing balance against flat rate
On a reducing balance, interest each month is charged on what you still owe. As the balance falls, the interest part of your instalment falls and the principal part grows, which is why the schedule above starts out almost all interest and ends almost all principal.
A flat rate charges interest on the original amount for the whole term, no matter how much you have already repaid. The number sounds smaller and costs more. A 10% flat rate is roughly equivalent to 17 or 18% reducing on a typical term, which is why some vehicle and retail lenders prefer to quote it. The comparison above shows the gap for the figures you entered.
The formula
The instalment is the standard annuity payment, where P is the principal, i the monthly rate (annual ÷ 12 ÷ 100) and n the number of months: EMI = P·i·(1+i)^n / ((1+i)^n − 1). The final instalment here absorbs the rounding drift so the balance lands exactly on zero rather than a few paisa either side, which is what banks do too.
What moves the total most
Term, more than rate. Lengthening a loan lowers the monthly figure and raises the total sharply, because you are borrowing the same money for longer. Try the same amount over 120 and 240 months and compare the total interest rather than the instalment.