What is EMI and how is it calculated?
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EMI (Equated Monthly Instalment) is the fixed monthly payment you make to repay a loan. It includes both the principal repayment and interest. The formula used is:
EMI = P × r × (1+r)ⁿ / ((1+r)ⁿ – 1)
where P = principal, r = monthly interest rate (annual rate ÷ 12 ÷ 100), and n = total number of months.
Does a higher loan tenure mean lower EMI?
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Yes — a longer tenure reduces your monthly EMI, making repayments more manageable. However, you end up paying significantly more interest over the full loan period. A shorter tenure means higher EMIs but much lower total interest. Use this calculator to find the right balance for your income and goals.
How does a prepayment affect my EMI?
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Making a partial prepayment reduces your outstanding principal, which directly reduces the total interest you pay. Banks typically allow you to either reduce the EMI amount or reduce the tenure after prepayment. Most banks in India allow prepayment without penalty for floating-rate loans. Contact us and we can help you plan a prepayment strategy.
What is a reducing balance method?
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Most banks use the reducing (or diminishing) balance method, where interest is calculated on the outstanding loan balance each month — not the original amount. This means as you repay, the principal reduces and so does the interest component of each EMI. This calculator uses the reducing balance method, which is the standard used by Indian banks.
How accurate is this EMI calculator?
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This calculator gives a very accurate estimate based on the standard EMI formula used by banks. The actual EMI may differ slightly due to processing fees, GST, rounding conventions, or specific bank policies. We recommend using this as a planning tool and then getting an official sanction letter from your bank or through us for exact figures.
Can I negotiate a lower interest rate?
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Absolutely. Interest rates depend on your CIBIL score, income stability, loan amount and relationship with the bank. As loan consultants, we negotiate on your behalf across 20+ lenders to get you the lowest possible rate. Even a 0.5% reduction on a ₹20 Lakh, 20-year home loan can save you over ₹1.2 Lakh in total interest. Contact us to know what rate you qualify for.