How Loan EMI Is Calculated
EMI stands for Equated Monthly Instalment — the fixed monthly payment you make to repay a loan over a specified period. Each EMI payment covers both interest charged on the outstanding balance and a portion of the principal. As the loan progresses, the interest portion decreases and the principal portion increases — a process called amortization.
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Formula
Loan EMI Calculator
Calculate monthly EMI, total payment, and total interest for any loan.
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Worked Example
Given:
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FAQs
What happens if I pay extra EMI?
Making extra payments reduces the outstanding principal, which reduces future interest charges. Over a long loan, even one extra EMI per year can shorten the loan term significantly and save considerable interest.
Is a longer loan term better?
A longer term reduces monthly EMI but increases total interest paid. A shorter term has higher monthly payments but costs less overall. Choose the shortest term your budget comfortably allows.
What is the difference between flat rate and reducing balance EMI?
Flat rate interest is calculated on the full principal throughout the loan, making the effective rate much higher than advertised. Reducing balance interest is calculated only on the remaining principal each month — the standard method used by most banks.