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This calculator uses the standard Reducing Balance method, which is mandatory for almost all retail loans in India. The interest component decreases monthly as the principal balance is repaid.
A Fixed Rate remains constant throughout the loan tenure, providing predictable EMI payments. A Floating Rate is linked to an external or internal benchmark (like RLLR or MCLR) and changes periodically, causing the interest rate and potentially the EMI or tenure to fluctuate.
When a borrower makes a pre-payment (partial or full), the amount directly reduces the outstanding principal. This results in the remaining EMI payments having a much larger principal component, significantly reducing the total interest paid and often shortening the loan tenure.
Certain segments of Home Loans, especially those involving lower amounts or specific beneficiary groups, qualify under the bank's Priority Sector Lending (PSL) targets mandated by the RBI. This classification is vital for meeting regulatory goals.
A Step-up EMI allows the borrower to start with lower EMIs that gradually increase over time, aligning with expected income growth. A Step-down EMI is the opposite—higher payments initially, decreasing later—suited for those expecting their income to drop after a certain period.
Yes. Under Section 80C of the Income Tax Act, the principal component of the EMI is deductible up to ₹1.5 Lakh per year. Additionally, the interest component is deductible up to ₹2 Lakh per year under Section 24(b) for self-occupied property (as of current tax laws).