EMI: Equated Monthly Instalment Explained
An Equated Monthly Instalment (EMI) is a fixed amount paid by a borrower to a lender on a specified date each month. It is the standard repayment format for home loans, personal loans, and car loans across South Asia, Southeast Asia, and many other markets.
EMI Formula
EMI = P × r × (1+r)ⁿ ÷ [(1+r)ⁿ − 1]
P = loan principal
r = monthly interest rate (annual rate ÷ 12 ÷ 100)
n = loan tenure in monthsExample: ₹10,00,000 home loan at 8.5% for 20 years
r = 8.5 ÷ 12 ÷ 100 = 0.007083
n = 240
EMI = ₹8,678/month
Total paid: ₹20,82,720 | Total interest: ₹10,82,720EMI Breakup: Principal vs Interest
In early months, a larger portion of the EMI goes to interest. As the loan matures, the interest component shrinks and the principal component grows. This is called the amortisation pattern.
Ways to Reduce Your EMI
- Negotiate a lower rate: Even 0.5% less saves significantly over 20 years
- Increase down payment: Lower principal = lower EMI
- Extend tenure: Reduces monthly EMI but increases total interest paid
- Part-prepayment: Reduces outstanding principal, lowering future EMIs or tenure
Calculate your EMI: Free EMI Calculator