Key Takeaway
When comparing loans, always compare total interest outflow and total cost of borrowing , not just the EMI amount. A lower EMI from a longer tenure can cost ₹2–₹4 lakh more in total interest.
20,00,000
Loan Offer A
Interest Rate8.5%
Tenure15 Yrs
Monthly EMI:₹19,695
Total Interest:₹15,45,062
Loan Offer B
Interest Rate8.2%
Tenure20 Yrs
Monthly EMI:₹16,979
Total Interest:₹20,74,864
Lifecycle Cost Differences
EMI Difference:2,716 / month
Total Interest Difference:5,29,801
The loan with the shorter tenure or lower interest rate will typically save you lakhs in total interest, even if the monthly EMI is slightly higher.
Cumulative Payment Projections
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Frequently Asked Questions
What factors should I compare between loans?
Compare: interest rate (fixed vs floating), processing fees, prepayment penalties, tenure flexibility, and the total cost of the loan (principal + total interest). A lower rate doesn't always mean a cheaper loan if fees are high.
Should I choose a fixed or floating rate loan?
In a falling interest rate environment, floating rates benefit you. In a rising rate environment, fixed rates offer protection. Currently in India, floating rates are more common and typically start lower than fixed rates.
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