EMI vs SIP calculator · India · loan and investment planner
The question every Indian borrower asks, and no ordinary EMI calculator answers
An EMI calculator tells you the instalment. A SIP calculator tells you the corpus. Neither tells you the thing you actually want to know: I have ₹1,00,000 a month. The EMI takes ₹67,000. What should the other ₹33,000 do — kill the loan faster, or go into a SIP?
That is a comparison, not a formula, and it cannot be answered with a rule of thumb like "prepay if the loan rate is above your return". This calculator simulates four complete strategies month by month across the whole tenure and reports which one leaves you with more money at the end — counting the asset, the corpus, the interest paid and the interest avoided.
Built for Indian borrowers: rupees, Indian loan conventions, reducing-balance EMI, step-up SIPs for people whose salary grows, and an SWP planner for what happens after the accumulation is over.
The four strategies, and why the winner surprises people
Every strategy starts from the same place — the same asset price, the same down payment, the same monthly budget — so the comparison is honest. Only the use of the surplus changes.
Strategy A — Take the loan, SIP the surplus
Pay the normal EMI for the full tenure. Every rupee of the budget the EMI does not consume goes into a monthly SIP from day one. You end with the asset and a corpus, but you pay every rupee of scheduled interest.
Strategy B — Take the loan, prepay the surplus, then SIP
Throw the surplus at the principal every month. The loan closes years early and a large amount of interest is never charged. From the closure month onward, the entire budget goes into the SIP — a bigger SIP, but starting later.
Strategy C — Shortest affordable tenure, then SIP everything
Instead of prepaying a 20-year loan, take the shortest tenure your budget can service in the first place. The EMI is far higher and the interest is far lower. When it ends, the whole budget goes into the SIP.
Strategy D — Do not buy at all. Rent, and invest everything
No loan, no asset. The down payment is invested on day one, and every month the difference between your budget and your rent is invested too. Rent rises each year. You end with a corpus and no property.
The result is not fixed, and that is the point. When the SIP return is well above the loan rate, investing early usually wins because the corpus compounds for longer. When the gap narrows — or the tenure is short — prepaying wins because interest saved is a certain, tax-free return while the SIP return is neither. The honest answer depends on your numbers, and the honest way to get it is to run both.
The formulas, written out
EMI on a reducing-balance loan
Every home, car and personal loan in India uses the reducing-balance method. The instalment is fixed; what changes is how much of it is interest.
EMI = P × r × (1+r)n ÷ [(1+r)n − 1]
- P — principal (loan amount, not the property price)
- ₹80,00,000
- r — monthly rate (annual rate ÷ 12 ÷ 100)
- 8% → 0.006667
- n — number of months
- 20 years → 240
- Monthly EMI
- ≈ ₹66,925
- Total interest over 20 years
- ≈ ₹80,62,000
On a 20-year loan at 8%, the interest is roughly equal to the amount borrowed. This is the single number most borrowers have never seen written down.
Future value of a SIP
A monthly investment compounding at a constant rate.
FV = A × [((1+r)n − 1) ÷ r] × (1+r)
- A — monthly instalment
- ₹33,000
- r — monthly return (12% a year)
- 0.01
- n — months
- 240
- Corpus after 20 years
- ≈ ₹3.30 crore
- Of which your own money
- ₹79,20,000
Notice the shape of it. You put in ₹79 lakh and finish with ₹3.3 crore — but the growth is not spread evenly. In a 20-year SIP, more than half the final corpus is built in the last five years. That is why time in the market beats the size of the instalment, and why a delayed start is expensive in a way that is invisible early on.
Step-up SIP
Your salary rises. A fixed SIP quietly shrinks against it. A step-up SIP raises the instalment by a set percentage every year — usually in line with your increment — and the effect on the final corpus is much larger than people expect. A 10% annual step-up on a 20-year SIP can end close to double the flat-instalment result, without any change in the return assumed.
SWP — the part after the corpus
A Systematic Withdrawal Plan takes a fixed amount out each month while the remainder stays invested. The calculator models the withdrawal, the growth of what is left, and an annual increase in the withdrawal to keep pace with inflation. It answers the retirement question directly: how long does this corpus last if I take ₹1 lakh a month and raise it 5% a year?
Prepay the home loan, or invest? The arithmetic behind the argument
Prepaying a loan at 8% is a guaranteed, tax-free 8% return. A SIP at an assumed 12% is neither guaranteed nor tax-free. Comparing 8% against 12% directly is the mistake in almost every version of this argument you will read.
The like-for-like comparison. Adjust the SIP side for tax and for risk before setting it against a certain saving.
| Consideration | Prepaying the loan | Investing the surplus |
|---|
| Certainty of the return | Certain — the interest is simply not charged | An assumption; equity does not deliver 12% every year |
| Tax on the gain | None | 12.5% LTCG on equity gains above the annual exemption |
| Liquidity | Poor — money is inside the house | Good — units can be redeemed |
| Effect on the old regime | Reduces the Section 24(b) interest deduction | ELSS can add to 80C |
| When it is strongest | Early years, when the EMI is nearly all interest | Early years, when compounding has the longest to run |
Prepay early or not at all. In year 1 of a 20-year loan at 8%, about 83% of every EMI is interest. In year 18, about 10% is. A prepayment made in year 2 removes interest that would have been charged for eighteen more years; the same amount in year 18 removes almost nothing. The timing of a prepayment matters more than its size, and the amortisation table in this calculator shows exactly where you are on that curve.
How to use this EMI and SIP calculator
- Set the asset price and the down payment. The loan is what remains. In India, lenders usually fund up to 80% of the property value, so a 20% down payment is the normal starting point.
- Enter the loan rate and the tenure. Use the rate you have actually been offered, not the advertised one — the gap is often half a percent, and over 20 years that is lakhs.
- Enter your monthly budget. This is the key input and the one people get wrong. It is everything you can commit each month to the loan and investing together, not just the EMI you were quoted.
- Set your expected SIP return. 12% is a common long-run assumption for Indian equity funds. Try 10% as well — if a plan only works at 12%, it is a plan with no margin in it.
- Read the Strategy Studio verdict. All four strategies, ranked, with the wealth each produces at the end of the tenure.
- Open the Loan tab for the amortisation schedule. This is where the interest-versus-principal split becomes visible year by year, and where the case for prepaying gets made or lost.
- Use the SIP Lab and the SWP planner. Test a step-up, add a lumpsum, and check whether the corpus you end with actually supports the monthly income you want afterwards.
What the simulation includes that a simple calculator does not
- The down payment as an investable sum. In the rent-and-invest strategy the down payment is invested on day one. Ignoring this is the most common way rent-versus-buy comparisons are quietly rigged in favour of buying.
- Rent that rises. Rent is not fixed for twenty years. The simulation raises it every year at the rate you set.
- Asset appreciation. The property grows at your assumed rate and is counted in the final wealth of every strategy that owns one.
- Interest actually avoided by prepaying, recomputed from a fresh amortisation rather than estimated.
- The shortest tenure your budget can service, found by search rather than guessed — often the quiet winner, and almost never the option a bank suggests.
Frequently asked questions
Should I prepay my home loan or invest in a SIP?
It depends on the gap between your loan rate and your realistic after-tax return, and on how early in the tenure you are. Prepaying is a certain, tax-free saving; a SIP is an uncertain, taxable gain. When the expected return is comfortably above the loan rate and you have fifteen years or more to run, investing usually wins. When the gap is small, or you are close to retirement, or the certainty itself has value to you, prepaying wins. This calculator runs both on your figures instead of asserting one.
How is EMI calculated in India?
EMI = P × r × (1+r)ⁿ ÷ [(1+r)ⁿ − 1], where P is the principal, r is the monthly interest rate and n is the number of months. All Indian retail loans use this reducing-balance method, so interest is charged on the outstanding balance each month, not on the original amount.
Why is my EMI mostly interest in the early years?
Because interest is charged on the outstanding balance, which is at its highest at the start. On a 20-year loan at 8%, roughly 83% of the first year's instalments is interest and only 17% reduces the principal. The proportion reverses slowly. This is also why prepayments made early are worth many times the same amount paid late.
Is a 12% SIP return realistic?
It is a common long-run assumption for Indian equity funds, and long-run index returns have been in that region — but no year delivers exactly 12%, and multi-year stretches of far less are normal. Run the calculator at 10% too. A plan that only works at 12% has no margin for the years that disappoint.
What is a step-up SIP and is it worth it?
A SIP whose instalment rises by a fixed percentage each year, usually matched to your salary increment. Over long horizons it makes a very large difference — the later instalments are bigger and still have years to compound. If your income rises and your SIP does not, your saving rate is falling every year without you deciding it should.
What is an SWP and how is it taxed?
A Systematic Withdrawal Plan redeems a fixed amount from your fund each month while the rest stays invested. Each withdrawal is a partial redemption, so only the gain portion is taxable — which usually makes it more tax-efficient than an equivalent dividend. Equity gains beyond the annual exemption are taxed at 12.5% for long-term holdings.
Should I take a shorter tenure or prepay a longer one?
A shorter tenure charges less interest, but it commits you to the higher EMI whether or not your income holds. A longer tenure with prepayments gives the same result with an escape route, at the cost of some discipline. The calculator prices both so you can see what the flexibility is actually costing.
Does prepaying reduce my EMI or my tenure?
Most Indian lenders default to reducing the tenure, which saves far more interest. If you ask instead for the EMI to be reduced, you keep the full term and save much less. Ask which one is being applied — it is a choice, and the default is rarely explained.
Does prepaying cost me the Section 24(b) tax deduction?
Partly. Under the old regime you may deduct up to ₹2,00,000 of home loan interest a year on a self-occupied property, so less interest means a smaller deduction. Under the new regime the deduction does not exist at all for a self-occupied home, which removes the objection entirely. Check which regime you are in before treating the deduction as a reason not to prepay.
Are there prepayment charges on a home loan in India?
On floating-rate home loans to individuals, lenders may not levy foreclosure or prepayment penalties. Fixed-rate loans and loans to non-individuals can carry charges. Confirm the type of your loan before making a large prepayment.
Can I compare renting against buying here?
Strategy D does exactly that — invests the down payment and every rupee of the budget rent does not consume. For a deeper treatment with stamp duty, tax relief and exit taxes, use the dedicated rent vs buy calculator.
Does this calculator handle a lumpsum as well as a SIP?
Yes. The SIP Lab accepts a one-time lumpsum alongside the monthly instalment and compounds both — useful for a bonus, a maturity, or the proceeds of a sale.
Is my data stored?
The whole simulation runs in your browser. Your figures stay on your device.
Is it free?
Everything on this page is free to read. Running the simulation needs an InvestVerdict account.
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Glossary
- EMI
- Equated Monthly Instalment — a fixed monthly payment covering interest and principal on a reducing-balance loan.
- Amortisation
- The schedule showing how each instalment splits between interest and principal over the life of the loan.
- Principal
- The amount borrowed, and the balance still owed. Interest is charged on this, not on the property price.
- Tenure
- The length of the loan. Longer tenure means a smaller EMI and substantially more total interest.
- Prepayment
- Paying more than the EMI, applied to the principal. It removes all future interest that balance would have attracted.
- Foreclosure
- Closing the loan entirely before the end of the tenure.
- SIP
- Systematic Investment Plan — a fixed amount invested every month into a mutual fund.
- Step-up SIP
- A SIP whose instalment increases by a set percentage each year, usually matched to salary growth.
- Lumpsum
- A single one-time investment, as opposed to a monthly instalment.
- SWP
- Systematic Withdrawal Plan — a fixed monthly withdrawal from an invested corpus.
- XIRR
- The annualised return of a series of cashflows that arrive on different dates — the right measure for a SIP.
- Opportunity cost
- What the money would have earned in its next-best use. The reason a down payment is never free.
Loan and investment mathematics on this page matches the engine powering the simulator above. Educational content only — not investment advice. Returns are assumptions, not promises; mutual funds carry market risk.