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Show formula & working
EMI = P′ × r × (1 + r)n ÷ ((1 + r)n − 1)
Equal principal: principal each instalment = P′ ÷ n; interest = balance × r
Moratorium: interest each month = balance × annual rate ÷ 12 — paid, or added to the loan (P′ = P × (1 + rate ÷ 12)months)
P′ = loan when repayment starts; r = annual rate ÷ 12 for monthly or ÷ 4 for quarterly instalments; n = number of instalments. Some banks charge interest monthly even when principal is repaid quarterly; the figures then differ slightly.RBI rule on pre-payment / foreclosure charges: rates and rules as of 28-Oct-2026 · Source: RBI (Pre-payment Charges on Loans) Directions, 2025 (2 Jul 2025, effective 1 Jan 2026). Every figure based on it stays editable.
How this works
Business term loans are repaid in one of two ways. With an EMI every instalment is the same, so principal is repaid slowly at first. With equal principal instalments (EPI) the principal part is fixed and interest is charged on the falling balance, so instalments start high and get smaller — and total interest is lower.
A moratorium gives time before repayment starts. If interest is paid during it, the loan stays the same; if it is added (capitalised), repayment starts on a larger balance.
Quarterly instalments suit businesses with lumpy cash flows, but each payment is about three times a monthly one.
Frequently asked questions
EMI or equal principal — which costs less?
Equal principal, because the balance falls faster, so less interest accrues. The trade-off is higher instalments in the early years — check them against your cash flow (the DSCR calculator helps).
Is interest charged during the moratorium?
Yes. A moratorium defers repayment, not interest. Paying it as it falls due keeps the loan from growing.
Are there charges for prepaying a business term loan?
For floating-rate business loans to individuals and micro and small enterprises, RBI's pre-payment directions bar charges at most lenders (smaller lenders: on loans up to ₹50 lakh), for loans sanctioned or renewed from 1 January 2026. Other loans follow the sanction terms.
Why do banks prefer quarterly instalments for some projects?
When sales are seasonal or paid on long credit, quarterly instalments line up repayments with cash inflows. The lender decides based on the project's cash flow.
Planning business borrowing?
Structure, tenure and the right lender matter as much as the rate. Talk to Rytvae before you apply.