How to use the Business Loan EMI Calculator
- Enter the loan amount and the annual interest rate from the lender's sanction letter.
- Enter the tenure in years or months.
- Optionally add the processing fee % to include it in the total cost.
Formula
EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
- P:
- loan amount
- r:
- monthly interest rate (annual rate ÷ 12 ÷ 100)
- n:
- number of monthly instalments
How EMI works on a reducing balance
Each EMI is the same amount, but its make-up changes. Early EMIs are mostly interest because the outstanding balance is high; later EMIs are mostly principal. That's why prepaying in the first few years saves the most interest.
Compare loans on total cost, not just EMI
A longer tenure lowers the EMI but raises total interest. A lower rate with a high processing fee can cost more than a slightly higher rate with no fee. Compare the total amount payable for each offer.
Worked example
₹10 lakh at 12% a year for 5 years
- r = 12 ÷ 12 ÷ 100 = 0.01; n = 60
- EMI = 10,00,000 × 0.01 × 1.01⁶⁰ ÷ (1.01⁶⁰ − 1)
- Total paid = 22,244.45 × 60 = ₹13,34,667
EMI ₹22,244.45; total interest ≈ ₹3,34,667
Important notes
- Floating-rate loans change EMI or tenure when the rate changes; this calculator assumes a fixed rate.
- GST applies to processing fees and is not included here.
Frequently asked questions
How is EMI calculated?
With the reducing-balance formula EMI = P × r × (1+r)ⁿ ÷ ((1+r)ⁿ − 1), where r is the monthly rate and n the number of months.
Does a longer tenure reduce the cost of a loan?
No. It reduces the EMI but increases the total interest paid, because the balance stays outstanding for longer.
Is the interest on a business loan tax-deductible?
Interest on money borrowed for business purposes is generally an allowable business expense. Confirm the treatment for your case with your accountant.