Loans & EMI
EMI principal vs interest
Each EMI contains both interest and principal, but the mix usually shifts toward principal over time.
Reducing balance matters
Interest is charged on the outstanding balance, not the original loan amount every month. That is why an amortization schedule is useful when comparing repayment options.
Reading a schedule
For each instalment, check the EMI, interest amount, principal amount and closing balance. The EMI can remain fixed while those internal amounts change.
Prepayment
A part-prepayment reduces outstanding principal. Depending on lender terms, it may shorten tenure, lower EMI, or do a combination. Confirm the lender's treatment and charges.
How to check the result yourself
Use the loan amount as P, divide the annual rate by 1,200 to get the monthly rate r, and multiply years by 12 for n. For a ₹10,00,000 loan at 8.5% for 20 years, the reducing-balance formula gives an EMI of about ₹8,678. Compare both the EMI and total interest when you change tenure.
This guide is for general education. Rules, lender terms, bank terms and individual circumstances can change the result.
Use the relevant calculatorFrequently asked questions
Does this include lender charges?
No. The calculator illustrates the reducing-balance EMI formula; verify fees, insurance, rate changes and lender terms separately.
What should I compare before choosing a tenure?
Compare the EMI, total interest and total repayment at the same loan amount and rate.