Frequently Asked Questions
EMI, loans, RBI compliance, and borrower rights
About EMI & Calculations
What is EMI?
EMI (Equated Monthly Instalment) is a fixed amount you pay to your lender every month to repay your loan. It includes both principal (loan amount) and interest. As you pay, the principal portion increases and interest decreases.
How is EMI calculated?
EMI is calculated using the formula: EMI = P × r × (1+r)^n / [(1+r)^n − 1], where P is principal, r is monthly interest rate, and n is number of months. This is the RBI-accepted method using monthly reducing balance.
Why does my final month EMI differ from others?
Due to rounding to 2 decimal places (currency standard), the final month's EMI may be slightly different to account for accumulated rounding throughout the loan tenure.
What is the difference between monthly reducing balance and simple interest?
With reducing balance (standard in India), interest is calculated monthly on the outstanding balance - as you pay principal, interest decreases. Simple interest would calculate on the original principal, which is unfair to borrowers. RBI mandates reducing balance method.
Loan Types & Features
What is the maximum EMI I can afford?
Generally, your monthly EMI should not exceed 35-40% of your monthly income. Use our Affordability Calculator to find your maximum affordable loan amount based on your income.
What is LTV (Loan-to-Value) ratio?
LTV is the loan amount as a percentage of the property value. For example, if you buy a ₹50 lakh home with a ₹40 lakh loan, LTV = 80%. Higher LTV means higher risk for lenders. Typical limits: Home loan (90%), Vehicle (85%), Business (70%).
What is the moratorium period for education loans?
Moratorium is an EMI-free period after course completion (typically 6 months to 1 year). During this period, you don't pay EMI, but interest may still accrue. Some lenders offer 0% interest during moratorium.
Can I get a floating rate loan?
Yes. Floating rate loans have interest rates linked to a benchmark (RBI repo rate, MCLR, etc.) and change with market conditions. Banks must inform you of rate changes immediately. EMI may change if you choose reduce EMI option.
RBI Compliance & KFS
What is KFS (Key Facts Statement)?
KFS is a standardized disclosure document mandatory since October 1, 2024, for all new retail loans. It shows loan terms, EMI, all charges, and APR in simple language, enabling you to compare loans across lenders.
How long is KFS valid?
KFS is valid for at least 3 working days for loans with tenure of 7+ days. If you agree to the terms within this validity period, the lender is bound by those terms.
What is APR (Annual Percentage Rate)?
APR is the true cost of borrowing expressed as an annual percentage. It includes interest rate + all charges (processing fee, insurance, GST, etc.). Always compare APR across lenders, not just interest rates.
Is this calculator compliant with RBI regulations?
Yes. Our calculator uses RBI-accepted EMI formula (monthly reducing balance method), generates KFS in RBI-mandated format, and calculates APR transparently. However, actual loan terms from your lender will supersede these indicative calculations.
Charges & Fees
What charges does a bank levy on loans?
Common charges: Processing Fee (0.5-2%), Loan Documentation, Loan Insurance (0.5-1% p.a.), Disbursement Charges, Pre-closure/Foreclosure Fees, Late Payment Penalties, GST on charges (18%). All must be disclosed in KFS.
Can banks charge extra fees not mentioned in KFS?
No. As per RBI regulations, only charges explicitly mentioned in the KFS can be levied. Any additional charges require explicit written consent from you. Violation can be reported to RBI Banking Ombudsman.
What is the difference between processing fee and GST?
Processing fee is charged by the bank for loan processing (one-time, typically 0.5-2%). GST (18%) is tax on the processing fee and other service charges. Both should be clearly shown in the KFS.
Are there charges for rate switching or loan transfer?
Yes, lenders may charge reasonable fees for switching from fixed to floating rate or transferring your loan to another lender. These charges must be disclosed upfront in the KFS.
Prepayment & Closing
Can I prepay my loan before tenure?
Yes, you have the right to prepay fully or partially anytime. For floating rate loans, prepayment is completely free. For fixed rate loans, the lender may charge prepayment penalties, which must be disclosed in the KFS.
What happens to my EMI if I prepay partially?
You can choose between two options: 1) Reduce EMI while keeping tenure same, or 2) Keep EMI same while reducing tenure. Your lender must let you choose.
What is loan foreclosure?
Foreclosure means paying off your entire loan before the tenure ends. Banks may charge a foreclosure fee (typically 1-2% of outstanding balance). Pre-closure charges are more common on fixed rate loans.
How long does loan closure take?
After final payment, the bank must issue a closure statement within 7 days. For secured loans (home, vehicle), the security must be released within 30 days. The bank must update credit bureaus showing zero balance.
Borrower Rights & Protection
What are my rights before taking a loan?
You have the right to: receive KFS at least 3 days before agreeing, understand all terms in simple language, compare offers across lenders, reject any offer, and ask questions about terms you don't understand.
What should I do if I can't pay my EMI?
Immediately contact your lender's customer service. Inform them of your financial hardship. Many banks offer restructuring options (extending tenure, reducing EMI temporarily). Late payment damages your credit score.
Can my lender harass me for non-payment?
No. RBI has strict rules against harassment. Lenders cannot abuse, threaten, or use aggressive recovery tactics. If facing harassment, report to your lender's grievance cell or RBI Banking Ombudsman.
How do I file a complaint against my lender?
Step 1: Contact lender's customer service (30-day response). Step 2: RBI Banking Ombudsman (free, 90 days). Step 3: RBI Complaint Portal (complaints.rbi.org.in). Step 4: Consumer court or legal action.
Tax Benefits
What tax benefits are available for home loans?
Section 80C: Deduction up to ₹1.5 lakh on principal repayment. Section 24(b): Deduction on interest paid (₹2 lakh max for self-occupied property, no limit for let-out property). These reduce your taxable income.
What tax benefits for education loans?
Section 80E: The entire interest amount paid on education loan is deductible with NO upper limit. This is a major benefit. Principal repayment is NOT deductible.
Are personal loans tax deductible?
No. Personal loans don't have direct tax benefits. However, if you use the loan for business purposes, interest may be deductible as business expense. Consult a tax advisor.
Can I claim tax benefits for multiple loans?
Yes, you can claim for multiple loans simultaneously. For example, home loan + education loan + vehicle loan. Each has its own tax benefit limits.
Interest Rates
What determines my interest rate?
Factors include: credit score, income, employment status, existing loans, age, loan tenure, loan-to-value ratio, current market rates, and RBI policies. Higher credit score = lower rate.
Can I negotiate my interest rate?
Yes. Compare offers from multiple banks. If you have a good credit score and income, you can negotiate for a lower rate. Some banks offer better rates during promotions.
What's the difference between SBLR, MCLR, and Repo Rate?
SBLR (Savings Rate) and MCLR (Marginal Cost of Funds Based Lending Rate) are benchmarks used by banks for floating rate loans. They change with RBI's Repo Rate. When RBI changes rates, your EMI on floating loans may change.
Can floating rate loans become fixed or vice versa?
Yes. As per new RBI rules, you can switch from floating to fixed or vice versa. Switching charges may apply but must be reasonable and disclosed in advance.
Using This Calculator
Is this calculator accurate?
Yes, our calculations use the exact RBI-accepted formula. However, actual EMI from your lender may differ slightly due to: rounding differences, additional charges specific to their policies, your credit profile, and current promotions.
Does this calculator store my financial information?
No. All calculations happen in your browser. We don't collect, store, or transmit any of your data. You don't need to log in or register.
Can I use these calculations to apply for a loan?
No, these are indicative calculations only. When you apply to a bank, they will provide an official KFS with their actual terms. Always use the bank's official KFS before signing the loan agreement.
Why do my calculations match different from bank's KFS?
Possible reasons: Your bank has different default charges, you didn't account for processing fee or insurance, rounding differences, or the bank uses slightly different calculation method. Always verify with your lender.
Didn't Find Your Answer?
For questions not covered here, check these resources:
RBI Official Website: www.rbi.org.in
RBI Banking Ombudsman: www.rbi.org.in/ombudsman (Free service)
RBI Complaint Portal: complaints.rbi.org.in
Your Bank's Customer Service: For loan-specific questions, contact your lender directly