Fullerton India Credit Co. Ltd. is Now SMFG India Credit Co. Ltd.

On availing of a personal loan, you are expected to repay the principal amount along with a certain percentage as interest levied by the loan provider. The payment of this amount is spread throughout the tenure of your loan.

The total interest payable throughout the tenure is an important factor to be taken into consideration because it can significantly increase the total sum payable to the lender.

How To Calculate Interest Rate On Personal Loan?

EMI is calculated using the below formulae: - 

EMI = P x R x (1+R)^N / [(1+R)^N-1] 


P - Principal
R - Rate of Interest (Monthly)
N - Loan Tenure

The Interest Rate is calculated monthly. If the ROI is 6%, then the calculation is 

R - 6/12/100 = 0.005

Here is a simplified example. 

If a loan amount of INR 20,00,000 at an annual ROI of 6% for 20 years, then the EMI is: 

EMI = 20,00,000 * 0.005 * (1+0.005)240 / ((1+0.005)240-1) = INR 14,329

Therefore, the total payable amount is INR 14,329 * 240 = INR 34,38,960. The Interest amount is: INR 34,38,960 - INR 20,00,000 = INR 14,38,960.

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

12 Months60 Months

Your Calculated EMI*


How to Calculate Interest Component on Personal Loan EMI?

If you would like to know the interest component of your EMI for a particular month/installment, you can use the IPMT formula in Microsoft Excel. The formula is as follows

=IPMT(rate, per, nper, pv, [fv],[type])


rate = the rate of interest. Thus, if you are being charged 12% annually, you need to enter 12%/12 for this field if you are calculating on a monthly basis.
per = the instalment or month for which you are calculating the interest component
nper = the overall loan tenure (in terms of number of EMIs)
pv = principal / loan amount
[fv] = this is an optional field and refers to the desired cash balance at the end of the loan tenure. Typically, this is set to 0
[type] = this can be 0 or 1 depending on whether the payment is being made at the beginning or end of the month

Here’s a working example for your reference


Loan Balance




Revised Balance







For subsequent months, the interest will be calculated on the new loan balance (also known as principal amount outstanding). The new loan balance is calculated as follows:

Loan paid - Principal already paid

The total interest payable is the sum of interest paid over the tenure of the loan.

What are the Factors Used to Calculate Rate of Interest?

While the Central Bank regulates the rate of interest, the rate of interest charged by different loan providers is calculated taking into account different factors like:

  • CIBIL Score

This score is a reflection of your creditworthiness. The minimum CIBIL score for availing a personal loan varies according to the internal policies of the lender.

  • Principal Amount

Your chances of obtaining a larger amount are higher for lenders with a good repayment history.

  • Repayment and loan tenure

The shorter the repayment tenure, the lesser the total interest to be paid.

It is advisable to have a clear idea about the terms and conditions and the interest payable to be able to shortlist a provider best suited to your needs. Log into the website of a loan provider, enter the details required in the personal loan calculator to help you calculate the interest and monthly installments. Make sure to invest adequate time on researching offers provided by different providers since a loan, like any other financial decision, causes a deep impact on your financial health.

Calculate Personal Loan Interest


Is a guarantor required for personal loans?

A guarantor is only required if the applicant:

  • Has a poor credit score and/or history.
  • Does not have a stable income source.
  • Is at risk of loan default or missed payments.

You can apply for a personal loan at SMFG India Credit without a guarantor as long as you have a credit score of at least 750 and a stable income source to repay without difficulty. If you have trouble with either, consider a co-applicant with a strong credit history and income source to avoid a guarantor. SMFG India Credit provides personal joint loans for family members.

What factors affect the personal loan process?

Many factors affect the personal loan process at SMFG India Credit. Some of the most important are:

  • Age: The individual’s age should be at least 22 years (25 for the self-employed) and should not be close to 65 at the time of loan maturity.
  • Credit score: A strong credit score is necessary and it should be 750 and above.
  • Occupation: Salaried employees with a long employment history tend to get higher loan amounts than the self-employed. This is because the steadier stream of income increases lenders’ confidence in their repayment ability.
  • Employer: Working with a reputed employer should help increase your chances of a lower interest rate.
  • Repayment capacity: A steady income source and a lower debt-to-income ratio, ideally below 30%, is beneficial.
  • Relationship with the lender: Existing customers with a strong repayment history tend to get preferential interest rates.

How is the interest rate calculated on a personal loan?

The formula for EMI is:

EMI = P * r * (1+r)^n/ ((1+r)^n-1)


P = principal

r = monthly interest rate

n = loan tenure

The interest rate is calculated on a monthly basis. If we consider annual ROI to be 6%, the calculation will be as follows:

R - 6/12/100 = 0.005.

How do lenders calculate interest on a loan?

Let us continue with the above example. Consider the loan amount to be INR 20,00,000 with a

tenure of 20 years/240 months and annual ROI of 6% (monthly = 0.005). Using the formula EMI = P * r * (1+r)^n/ ((1+r)^n-1), the EMI is calculated to be INR 14,329. The total amount payable is INR 14,329 * 240 = INR 34,38,960.

The interest amount will be: INR 34,38,960 - INR 20,00,000 = INR 14,38,960.

How does credit score affect the interest rate on a personal loan?

A credit score of 750 and above shows strong creditworthiness. It will increase your chances of loan approval with a lower interest rate, provided you fulfill other eligibility criteria. Paying credit card dues or loans on time, not using too much credit, and not applying for too much credit at once are some ways you can improve your credit score.

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