How is EMI Calculated?

Every reducing-balance loan uses the same formula:

EMI = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1]

Here, P is the loan amount, r is the monthly interest rate (the yearly rate divided by 12), and n is the number of monthly instalments. Your early EMIs are mostly interest and your later ones mostly principal. The amortization schedule below the calculator shows that split for every year of your loan.

A Fully Worked Example

Take a ₹10 lakh loan at 8.5% for 20 years. The EMI comes to ₹8,678, and the total repayment is about ₹20.83 lakh. Notice that the interest of ₹10.83 lakh is more than the loan itself. In the first year, roughly ₹84,000 of the ₹1.04 lakh you pay is interest. By year 15, the proportions have flipped. This is why prepaying early saves so much: money prepaid in year 2 would otherwise have carried interest for 18 more years.

What are Loan Rates Like Right Now?

As of July 2026, with the RBI repo rate at 5.25%, floating-rate loans have become cheaper. Home loans start around 7.1% to 7.5% at large banks for strong credit profiles. Car loans typically run 8.5% to 11%, and unsecured personal loans from about 10.5% to 18% or more. Your actual rate depends on your credit score, income and lender, so treat these as indicative and confirm live quotes.

Three Ways to Pay Less Interest

First, choose a shorter tenure if the EMI is affordable: a ₹50 lakh loan at 8% costs about ₹39.7 lakh in interest over 20 years but only ₹22.75 lakh over 15, so a 14% higher EMI cuts the interest by 43%. Second, prepay when you can. Even one extra EMI a year meaningfully shortens the loan, and floating-rate home loans have no prepayment penalty. Third, shop for the rate: half a percent lower on ₹50 lakh over 20 years saves roughly ₹3.5 to 4 lakh.

How Much EMI Can You Afford?

Lenders allow total EMIs up to 40% or 50% of your net income when they work out how much you can borrow, but that ceiling assumes nothing ever goes wrong. A sturdier personal rule is to keep all EMIs within about 35% of take-home pay, hold an emergency fund covering six months of EMIs before you borrow, and leave headroom for rate rises on floating loans. A 1% rise on a ₹50 lakh, 20-year loan adds roughly ₹3,000 a month.

FAQs about EMI Calculator

EMI = P × r × (1+r)ⁿ ÷ [(1+r)ⁿ − 1] with monthly rate r and n monthly instalments. For ₹10 lakh at 9% over 5 years, the EMI is about ₹20,760.
Interest accrues on the outstanding balance, which is largest at the start. As the balance falls, the interest component shrinks and the principal component grows — the amortization schedule makes this visible.
Keeping the EMI constant and shortening the tenure saves far more interest than lowering the EMI — choose tenure reduction unless you need the monthly relief.
As of July 2026 (repo 5.25%): home loans from roughly 7.1–7.5% for strong profiles, car loans ~8.5–11%, personal loans ~10.5–18%+. These are indicative; your quote depends on credit score and lender.
Floating-rate loans are benchmarked to the repo (or an external benchmark), so cuts and hikes pass through at your reset date. Lenders usually adjust the tenure rather than the EMI by default — ask for an EMI reduction explicitly if you prefer it.
Moving your outstanding loan to a lender offering a lower rate. Worth it when the rate saving comfortably exceeds processing/legal fees — typically a gap of 0.35–0.5%+ with several years of tenure left. Run both loans through this calculator to compare total outgo.