EMI & the true cost of the loan
The two figures to put in front of a buyer: the monthly EMI they asked for, and the total interest they did not. Built for agents running the numbers across a table.
Your numbers
| Interest as a share of the loanAbove 100% means the buyer pays more in interest than they borrowed. | — |
| Interest in the first EMIShows how little principal an early payment retires — the argument for prepaying early. | — |
| Saved by taking 5 years off the tenureThe EMI rises, but this is what the buyer keeps. | — |
Every buyer asks what the EMI will be. Almost none ask what the loan costs in total, and that is the number that changes how they think about tenure.
On a twenty-year loan at typical rates, a buyer commonly repays close to double what they borrowed. Showing that alongside the EMI is not a scare tactic — it is the fastest way to have an honest conversation about whether a shorter tenure or a larger down payment is worth it to them.
The formula
EMI = P × r × (1+r)n ÷ [(1+r)n − 1], where P is the loan, r is the monthly rate (annual ÷ 12 ÷ 100) and n is the number of months. This is the standard reducing-balance formula every Indian lender uses, so the result should match a bank quote closely — small differences come from rounding and the exact disbursement date.
Worked example
₹60 lakh at 8.5% over 20 years. The monthly rate is 0.7083%, n is 240. The EMI works out to about ₹52,000. Over 240 months that is roughly ₹1.25 crore repaid on a ₹60 lakh loan — about ₹65 lakh of interest, which is more than the loan itself.
Shorten the tenure to 15 years and the EMI rises to roughly ₹59,000 — around ₹7,000 more a month — but the total interest falls by well over ₹15 lakh. That trade is worth putting in front of a buyer explicitly, because most have never seen it.
What to tell the buyer
The first EMI on that loan is about ₹42,500 of interest and ₹9,500 of principal. That is why prepaying early is disproportionately effective, and why the EMI they pay in year one barely dents what they owe.
Also say the thing agents skip: do not take any new loan or credit card between now and registry. A new obligation changes the eligibility calculation and it is the most common self-inflicted deal-killer.
Questions
Does a lower EMI mean a cheaper loan?
No — usually the opposite. A lower EMI almost always comes from a longer tenure, which increases the total interest substantially. The EMI is a cash-flow number; total interest is the cost number.
Will this match what the bank quotes?
Closely. Lenders use the same reducing-balance formula. Differences come from rounding, the exact disbursement date, and any charges folded into the loan amount.
Should a buyer prepay or invest the surplus?
That is a financial planning question that depends on their tax position, risk appetite and alternatives — not something an agent should answer. What you can show is the interest saved, so they can weigh it properly.
The number convinces. The reel gets you the call.
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