How is EMI calculated?
EMI (Equated Monthly Instalment) is the fixed amount you pay your lender every month until the loan is fully repaid. Banks use this formula:
- P = loan amount (principal)
- r = monthly interest rate = annual rate ÷ 12 ÷ 100
- n = number of monthly instalments
Example
For a ₹25 lakh home loan at 8.5% for 20 years: r = 8.5 ÷ 12 ÷ 100 = 0.00708 and n = 240. The EMI works out to about ₹21,696, and you pay roughly ₹27.07 lakh in interest over 20 years, more than the loan itself.
How to lower your EMI or total interest
- Make a bigger down payment so you borrow less.
- Prepay when you can. Early prepayments save the most because interest is front-loaded (see the schedule above).
- Compare lenders. Even 0.5% less on a long home loan can save lakhs.
- Pick the shortest tenure you can comfortably afford. A higher EMI means far less total interest.
Frequently asked questions
Does a longer tenure reduce EMI?
Yes. A longer tenure lowers the monthly EMI, but you pay much more total interest over the life of the loan.
Is the EMI shown here exact?
It is an estimate for a fixed-rate loan. Your lender's figure may differ slightly due to processing fees, rounding, or floating interest rates.
Why is most of my early EMI going to interest?
Interest is charged on the outstanding balance. Early on the balance is highest, so the interest portion is largest. As you repay, more of each EMI goes toward the principal.
This calculator is for information only and is not financial advice. Check final figures with your lender.