Loans & EMI
How EMI is calculated
A reducing-balance EMI combines interest on the outstanding loan balance with a principal repayment each month.
The formula
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is principal, r is the monthly interest rate and n is the number of monthly instalments.
Why the early split looks different
Interest is calculated on the remaining principal. At the start, that balance is larger, so more of an EMI usually goes to interest. As the balance falls, more goes to principal.
What changes the total cost
A longer tenure normally reduces EMI but increases the months over which interest is charged. Rate changes, fees and prepayments can make a lender's schedule differ from a simple estimate.
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.