Here’s an EMI simulation with both fixed and floating interest rates using the same loan amount and tenure for comparison. This will help you visualize how EMI changes when choosing either option.
✅ Loan Details Used for Simulation
- Loan Amount: ₹50,00,000
- Tenure: 20 years (240 months)
- Fixed Interest Rate: 8.5% p.a.
- Floating Interest Rate: 7.5% p.a. initially, adjustable ±1% depending on market
✅ EMI Formula Recap
EMI=P×r×(1+r)n(1+r)n−1EMI = \frac{P × r × (1+r)^n}{(1+r)^n – 1}EMI=(1+r)n−1P×r×(1+r)n
Where:
- P = Loan amount
- r = Monthly interest rate (annual rate ÷ 12 ÷ 100)
- n = Tenure in months
📊 Fixed Rate EMI Calculation
- r = 8.5 ÷ 12 ÷ 100 = 0.007083
- n = 240
EMI=5000000×0.007083×(1+0.007083)240(1+0.007083)240−1EMI = \frac{5000000 × 0.007083 × (1+0.007083)^{240}}{(1+0.007083)^{240} – 1}EMI=(1+0.007083)240−15000000×0.007083×(1+0.007083)240
➡ EMI ≈ ₹43,433 per month
📊 Floating Rate EMI Calculations
Scenario A – Initial rate 7.5%
- r = 7.5 ÷ 12 ÷ 100 = 0.00625
- n = 240
EMI=5000000×0.00625×(1+0.00625)240(1+0.00625)240−1EMI = \frac{5000000 × 0.00625 × (1+0.00625)^{240}}{(1+0.00625)^{240} – 1}EMI=(1+0.00625)240−15000000×0.00625×(1+0.00625)240
➡ EMI ≈ ₹40,263 per month
Scenario B – Rate increases by 1% to 8.5% (same as fixed)
➡ EMI ≈ ₹43,433 per month
Scenario C – Rate increases by 2% to 9.5%
- r = 9.5 ÷ 12 ÷ 100 = 0.007916
EMI≈₹45,738permonthEMI ≈ ₹45,738 per monthEMI≈₹45,738permonth
Scenario D – Rate drops by 1% to 6.5%
- r = 6.5 ÷ 12 ÷ 100 = 0.005417
EMI≈₹38,896permonthEMI ≈ ₹38,896 per monthEMI≈₹38,896permonth
✅ Summary Table – EMI Comparison
| Scenario | Interest Rate | EMI (₹) |
|---|---|---|
| Fixed Rate | 8.5% | 43,433 |
| Floating (Initial) | 7.5% | 40,263 |
| Floating +1% | 8.5% | 43,433 |
| Floating +2% | 9.5% | 45,738 |
| Floating −1% | 6.5% | 38,896 |
✅ Key Insights
✔ Initial EMI is lower with floating by ₹3,170 compared to fixed
✔ If rates rise by 2%, EMI increases by ₹2,305
✔ If rates drop by 1%, EMI decreases by ₹4,137
✔ Fixed EMI is predictable, floating EMI depends on market changes
✔ Choosing floating can save money if rates drop—but can be riskier if rates rise
✅ Key Observations:
✔ The fixed rate at 8.5% shows a steady, predictable repayment path.
✔ The floating rate at 7.5% starts lower but gradually diverges from the fixed option if rates rise.
✔ At 9.5% floating, repayments increase significantly over time.
✔ At 6.5% floating, cumulative payments remain much lower, highlighting potential savings if rates fall.