About this tool
The EMI vs SIP Calculator helps you decide whether to use extra cash to prepay your loan (saving interest) or invest in a SIP (earning returns). It compares the total interest saved from prepayment against the corpus built by SIP over the same period.
The EMI / mortgage formula
Equated Monthly Installment is fixed monthly payment that pays off principal + interest over the term. The formula:
EMI = P x r x (1+r)^n / ((1+r)^n - 1)
where P = principal, r = monthly interest rate (annual / 12), n = total months. Every payment is the same amount, but the SPLIT between interest and principal shifts over time:
- Early payments: mostly interest. On a 30-year loan at 7%, the first payment is ~85% interest, ~15% principal.
- Mid-loan: roughly 50/50 around year 18-22.
- Late payments: mostly principal. The last year is ~5% interest, ~95% principal.
EMI vs SIP head-to-head (₹25,000/month for 20 years)
The same ₹25,000/month for 20 years: paying off a home loan finishes around ₹60L total outflow, while an equity SIP at 12% historical return ends with ₹2.5+ crore corpus. This compares an outflow to a corpus, so it is not apples-to-apples - but it shows why prepaying a low-rate home loan early is usually less productive than investing the same money in equity.
When EMI prepayment beats SIP, and vice-versa
| Scenario | Better choice | Why |
|---|---|---|
| Personal loan @ 14%+ | Prepay | Loan rate exceeds expected equity return post-tax |
| Credit card revolving | Prepay | 36-42% APR; nothing beats this |
| Car loan @ 9-11% | Mixed - close to ELSS post-tax | Slight edge to invest, prepay if risk-averse |
| Home loan @ 8.5% (old regime, 80C/24) | SIP wins (~5-6% post-tax effective rate) | Tax shield brings effective rate below long-term equity return |
| Home loan @ 8.5% (new regime, no shield) | SIP wins (slimly) | Effective rate ~8.5%; equity at 12% pre-LTCG-tax |
| Education loan @ 10% (80E deduction) | SIP wins | After-tax rate ~7%; well below equity expectation |
How to think about EMI vs SIP
- Effective loan rate after tax: home loan @ 8.5% under old regime with full Section 24(b) and 80C utilization is effectively ~5-6%. Below long-term equity return, so invest.
- Risk tolerance: prepayment is risk-free; equity SIP can drawdown 30-50% in a bad year. If a market crash would force you to pause SIP or sell at a loss, the EXPECTED return is lower than the historical average.
- Behavioral edge: a paid-off home is psychologically powerful. Some people sleep better with no debt - if that's you, prepay despite the math.
- Liquidity: SIP corpus is liquid (sell anytime, ELSS after 3-yr lock). Prepayment is gone - cannot retrieve unless you take a fresh loan against the property.
- Tax interaction: prepaying reduces your interest payment, which reduces your Section 24(b) deduction. Factor in the lost deduction when computing effective return.
Frequently asked questions
Prepay or invest?
If loan rate > SIP return (post-tax), prepay. If SIP returns exceed loan rate, invest. Also consider tax benefits (Sec 24b for home loan interest, Sec 80C for principal).
Should I prepay my home loan or start a SIP?
If your home loan rate is 8.5% and you can claim Section 24(b) + 80C tax shields, the effective cost is ~5-6%. Equity SIP at 12% historical return wins by a large margin over 15-20 years. Above ~11% loan rate (personal/car loan), prepayment wins because equity returns barely beat the loan cost.
What rate of return should I assume for SIPs?
Indian equity (Nifty 50 + Nifty Midcap) has delivered 11-13% CAGR over 20-year rolling periods historically. Use 10-12% as a conservative planning assumption. Above that is optimistic; below that is pessimistic. After 10% LTCG tax on gains above ₹1.25L/year, net return is 8-10%.
Can I do both - SIP plus loan prepayment?
Yes, and many financial planners suggest exactly this. Split monthly surplus: e.g. 70% SIP, 30% loan prepayment. You get equity upside AND faster loan payoff. Or use a year-end bonus rule: prepay the loan with bonus 1, SIP with bonus 2, alternating.
Does the new vs old tax regime change the answer?
Yes. Old regime gives Section 24(b) (up to ₹2L interest) + 80C (₹1.5L principal) deductions, reducing effective home loan rate by ~30% at top slab. New regime gives no such shields. Under new regime, the prepay-vs-invest math is closer; under old regime, investing wins more clearly for home loans.
What about LTCG tax on the SIP corpus?
Long-Term Capital Gains on equity (held over 1 year) are taxed at 10% above ₹1.25 lakh per year. So a 12% pre-tax equity return becomes ~10.8% post-tax. Still well above an 8.5% loan rate, especially with tax shield on the loan interest.
How accurate is the EMI vs SIP Calculator?
It applies the standard formula. Accuracy is limited only by your input precision. For decisions with material consequences (taxes, medical, legal, structural), use the result as a starting point and verify with a qualified professional in the relevant field.
Is the EMI vs SIP Calculator free to use?
Yes. 100% free, no signup, no payment, no API key. The site is funded by display ads around the tool but not inside the calculation flow.
Are my inputs saved anywhere?
No. All inputs stay in your browser tab. Closing the tab discards them. The site uses Google Analytics for traffic measurement (anonymized) but the analytics never see what you type into the form.
Can I use the EMI vs SIP Calculator on my phone?
Yes. The tool is responsive and tested on iOS Safari, Android Chrome, and major desktop browsers. Touch targets meet Apple's 44pt and Google's 48dp minimum.
Does the EMI vs SIP Calculator work offline?
Yes. Once the page has loaded, it works without internet. The calculation runs in JavaScript on your device.
How do I report a bug or suggest improvement to the EMI vs SIP Calculator?
Email hi@3tej.com with the URL of this page and a description of what you saw vs expected. We typically respond within 72 hours.
Can I share results from the EMI vs SIP Calculator?
Take a screenshot or copy the output. The page doesn't generate shareable URLs for specific calculations - inputs stay in your browser only.
Why are the results different from another emi vs sip tool?
Most likely: different formula assumptions, different default values, different rounding rules, or different applicable rates. Check the methodology if both tools document it. Both can be valid for different scenarios.