What is an EMI?
An EMI (Equated Monthly Instalment) is the fixed amount you pay each month to repay a loan, covering both interest and a portion of the principal. Almost all Indian home, personal, car and education loans work on a reducing-balance basis — interest is charged only on the outstanding principal, so the interest portion of your EMI shrinks and the principal portion grows every month, even though the EMI itself stays the same.
How EMI is calculated
This calculator uses the standard reducing-balance formula used by Indian banks and NBFCs:
EMI = P × r × (1 + r)n / ((1 + r)n − 1)
where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the number of monthly instalments (years × 12).
where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the number of monthly instalments (years × 12).
A worked example
A loan of ₹10,00,000 at 10% p.a. for 20 years (240 months):
EMI = ₹9,650 approximately, with total interest of about ₹13,16,000 over the full tenure — more than the principal itself, which is typical for a long-tenure loan.
What affects your EMI
- Loan amount — EMI scales roughly proportionally with principal, all else equal.
- Interest rate — even a small rate difference compounds significantly over a long tenure.
- Tenure — a longer tenure lowers the EMI but increases total interest paid; a shorter tenure raises the EMI but reduces total interest.
- Prepayment — paying extra toward principal reduces the outstanding balance, which either shortens the tenure or lowers future EMIs, depending on what the lender allows you to choose.
Reducing balance vs flat rate. This calculator assumes reducing-balance interest, which is standard for home, personal and most car loans. Some consumer-durable and a handful of other loans quote a "flat rate" instead, calculated on the full original principal for the whole tenure — a flat rate of a given percentage works out to a meaningfully higher effective interest rate than the same percentage on a reducing balance. Always check which method a lender is quoting before comparing offers.