How is EMI calculated?
EMI (Equated Monthly Instalment) is the fixed amount you pay your lender every month until the loan is fully repaid. Each EMI contains two parts: interest on the outstanding balance and a portion of the principal. Early in the loan most of your EMI goes to interest; towards the end, most of it reduces the principal.
Where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of monthly instalments.
Example
A ₹25,00,000 home loan at 8.5% for 20 years gives an EMI of about ₹21,696. Over 20 years you'd pay roughly ₹27.1 lakh in interest, more than the loan itself. Use the sliders above to see how a shorter tenure or a lower rate changes that.
5 ways to reduce your EMI burden
- Make a bigger down payment so you borrow less.
- Compare lenders. Even 0.5% lower interest saves a lot over a long loan.
- Prepay when you can. Lump-sum prepayments cut the principal and the total interest.
- Choose a shorter tenure if the EMI fits your budget. You pay far less interest overall.
- Keep a good credit score (750+) to qualify for the best rates.
Frequently asked questions
Does a longer tenure reduce EMI?
Yes. A longer tenure lowers the monthly EMI but increases the total interest you pay over the life of the loan.
Is this EMI calculator accurate?
It uses the standard reducing-balance formula used by banks. Your lender's final figure may differ slightly due to processing fees, insurance or rounding.
What is a good EMI-to-income ratio?
Most lenders prefer that all your EMIs together stay below 40–50% of your monthly take-home income. Staying under 30–35% leaves a comfortable buffer.
Does prepayment reduce EMI or tenure?
Either, depending on your lender. Reducing tenure usually saves more interest, while reducing EMI frees up monthly cash flow.