MoneyClarityTech · Business loans

Your EMI calculator is answering the wrong question.

A home loan or a car loan is repaid by EMI — one fixed figure every month. Many business term loans are not. The bank splits the principal into equal parts, and charges interest separately each month on whatever is still outstanding. That makes the first month the heaviest one, and the first month is the one your business has to survive. Put in your loan and see it.

Loan amountThe term loan the bank sanctions — for PMEGP, the bank's share, not the project cost

Interest rate% a year, as written in your sanction letter

Repayment periodYears of principal repayment, after any moratorium

MoratoriumMonths before principal starts. Interest is still paid every month — enter 0 if none

Principal falls dueInterest is charged monthly either way

My sanction letter saysNot sure? Read the first trap below

Your heaviest month

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Principal part—

Last month—

Total interest—

The same loan, two ways

Same amount, same rate, same years. Only the way the bank collects it changes — and it changes who carries the weight, you early or you late.

Principal + interestCommon on bank business term loans

Heaviest month—

Last month—

Total interest—

Equated EMISame figure every month

Every month—

Last month—

Total interest—

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Month by month

Every figure the bank will debit, in order. The shaded row is the heaviest month.

Month	Owed at start	Principal	Interest	You pay	Owed after

What the counter does not explain

Which method is yours? The sanction letter says it in one line

If the repayment clause reads like "in 60 equal monthly instalments of ₹6,667, interest to be serviced separately as and when charged", it is principal plus interest. If it names a single monthly figure that covers everything, it is an EMI. Both appear on business loans in India — lenders choose, the scheme does not. Ask before you sign, because the first month differs by thousands.

The appraisal tests the heaviest month, not the average

When a branch checks whether your cash flow can carry the loan, the question is the peak instalment. On the principal-plus-interest method that is month one — right when a new unit is still finding its customers. A project that only works from year two does not pass.

Interest is a separate debit, and it can go overdue on its own

The bank charges interest to the loan account at the end of each month. If the money to cover it is not there, the account is irregular even though you paid the principal part in full. Keep the account funded for both lines, every month.

When a floating rate moves, you feel it the same month

On this method the interest line is recomputed on the new rate straight away, so the monthly outgo rises or falls at once. On an EMI loan the bank often keeps the instalment and stretches the tenure instead. Neither is kinder — one is just more visible.

A moratorium pauses principal, not interest

In most schemes, including PMEGP and Mudra term loans, interest keeps falling due during the holiday. This tool assumes you pay it monthly. If your lender lets it pile onto the loan instead, the amount you repay later is higher than shown here.

How to read this. Interest here is charged each month at one-twelfth of the annual rate on the balance outstanding at the start of that month. Banks usually compute it on the daily balance for the actual days in the month, so real debits move by a few rupees from month to month; the totals stay very close. On quarterly principal, interest is still charged monthly. Any rounding difference in principal is settled in the last instalment, as lenders do. The EMI comparison uses the standard reducing-balance formula over the same repayment period. Processing fees, guarantee fees, insurance and GST are not included. Your sanction letter and Key Fact Statement are the final word. This tool is education, not advice. Nothing is uploaded, nothing is stored, and every figure is computed on your own phone.