What is the EMI and total interest on a ₹5 lakh loan at 10% over 5 years?
Scenario
Rohit, age 30, software professional in Pune, ₹12 lakh annual income, ₹50K monthly expenses, exploring this question for his financial plan
Inputs
- Rate %
- 10
- Tenure years
- 5
- Loan amount INR
- 5,00,000
Calculation
- 1.
Monthly rate
10% / 12 → 0.83%
- 2.
Monthly EMI
P×r×(1+r)^n / ((1+r)^n − 1) → ₹10,624
- 3.
Total paid over tenure
EMI × 60 → ₹6.37 L
- 4.
Total interest
Total paid − Principal → ₹1.37 L
- 5.
Interest-to-principal ratio
Interest ÷ Principal → 0.27x
Conclusion
EMI of ₹10,624/month over 5 years; total interest ₹1.4 lakh — 27% of principal.
Tradeoffs
Reducing-balance method; flat-rate quotes look cheaper but cost the same. Prepaying in early years saves disproportionate interest (₹5L early-year prepay can save ₹15L+ in interest vs late-year). Tax deductions (Section 24/80EEA for home loans) reduce effective rate by 25-35% in 30% slab old regime.