How EMI is calculated
Banks in Nepal charge interest on a reducing balance: each month, interest is charged only on the amount you still owe. The monthly instalment (EMI) stays the same, but early instalments are mostly interest and later ones are mostly principal. The formula is:
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)
where P is the loan amount, r is the yearly rate divided by 12 and 100, and n is the number of months.
Tips before you borrow
- Interest rates change. Most loans in Nepal are linked to the bank’s base rate plus a premium, so your EMI or loan period can change when the base rate moves. Ask the bank how often it reviews the rate.
- Count the fees. Service charges, valuation fees and insurance add to the cost.
- Pay extra when you can. Prepaying part of the principal early saves the most interest. Check if your bank charges a prepayment fee.
- A shorter period costs less overall. The EMI is higher, but total interest drops a lot. Try 15 years instead of 20 above to see the difference.
Questions
Is this the exact EMI my bank will charge?
It is the standard reducing-balance calculation. Your bank’s figure may differ slightly because of rounding, the day interest starts, fees, or rate changes during the loan.
What is a flat rate?
With a flat rate, interest is charged on the full loan for the whole period, which costs much more. Most bank loans in Nepal use a reducing balance, as this calculator does.
Can I enter lakh and crore?
Yes. Type the amount with or without commas, like 5000000 or 50,00,000. The words under the box confirm the amount.