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What a loan's tenure really costs you

A longer loan means a smaller EMI, but a lot more interest over time. This chart shows the total interest on one illustrative loan at each tenure. Free to embed on your own site.

What a loan's tenure costs you Illustration: a Rs 50 lakh loan at 8.5% a year. Total interest paid, by tenure. 10 years Rs 24.4 lakh · EMI Rs 61,993 15 years Rs 38.6 lakh · EMI Rs 49,237 20 years Rs 54.1 lakh · EMI Rs 43,391 25 years Rs 70.8 lakh · EMI Rs 40,261 30 years Rs 88.4 lakh · EMI Rs 38,446 A longer tenure lowers the EMI but adds a lot of interest: the same loan costs far more over 30 years than over 10. Reducing balance method; amount and rate are illustrative, not a quote. greenfunds.co.in

Source: the standard reducing-balance EMI formula. The 50 lakh rupee amount and 8.5% rate are illustrations, not a specific lender's quote; use the EMI calculator for your own numbers.

This is an illustration using the standard reducing-balance method. The 50 lakh rupee amount and 8.5% rate are examples, not a lender's quote, and it is not advice. Your own EMI and interest depend on the amount, rate and tenure you are offered.

Why the longer bars are so much bigger

Interest is charged on the balance you still owe. Stretch a loan over more years and that balance stays high for longer, so interest keeps adding up. The EMI falls because you repay the same loan more slowly, but the total you hand over grows. Before stretching a tenure, read should you prepay a loan.

Work out your own numbers

Questions people ask

Does a longer loan tenure cost more?

Yes, almost always. A longer tenure lowers the monthly EMI, which is why it looks easier, but you pay interest for more years, so the total interest is much higher. In the illustration, a 50 lakh rupee loan at 8.5% costs far more over 30 years than over 10.

How are the EMI and total interest worked out?

With the standard reducing-balance formula that Indian banks use. Each month, interest is charged on the loan still outstanding, and the rest of the EMI pays the loan down. Total interest is the EMI times the number of months, minus the loan amount.

Should I pick the shortest tenure?

A shorter tenure saves interest but needs a higher EMI, so it has to fit your budget comfortably. Many people pick the shortest tenure they can afford, and prepay later when they can. Work your own numbers in the calculator to see the trade-off.

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