What is an EMI?
An Equated Monthly Instalment (EMI) is the fixed amount you pay your lender every month until a loan is fully repaid. Each EMI has two parts: interest on the outstanding balance and repayment of principal. In the early months most of the EMI goes towards interest; as the balance falls, the principal share rises. This is called the reducing-balance method and it is how every Indian bank, housing finance company and NBFC computes home, car, education and personal loan EMIs.
EMI formula
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of monthly instalments.
Worked example
Home loan of ₹25,00,000 at 8.5% for 20 years: r = 8.5 ÷ 1200 = 0.007083, n = 240. EMI = 25,00,000 × 0.007083 × (1.007083)240 ÷ ((1.007083)240 − 1) = ₹21,696. Total payment over 20 years is about ₹52.07 lakh, of which ₹27.07 lakh is interest — more than the amount borrowed. Shortening the tenure to 15 years raises the EMI to ₹24,618 but cuts total interest to ₹19.31 lakh.
How to use this calculator
- Enter the loan amount, annual interest rate and tenure (switch between years and months).
- Use the sliders to see instantly how a small change in rate or tenure changes the EMI.
- Read the doughnut chart for the principal-vs-interest split and scroll the amortization table for month-by-month principal, interest and closing balance.
- Switch to the yearly view to see how much of the loan is cleared at the end of each year — useful for planning prepayments and claiming Section 80C (principal) and 24(b) (interest) deductions.
- Download the schedule as CSV or Excel for your records or your CA.
Who should use it
Home buyers comparing bank offers, salaried borrowers checking affordability before applying, accountants preparing loan schedules for books of account, and anyone who wants to know how much interest a loan really costs. Remember that the EMI excludes processing fees, insurance and GST on charges; use the APR calculator for the all-in cost.
Frequently Asked Questions
How is EMI calculated on reducing balance?
Interest for each month is charged only on the outstanding principal. The EMI stays fixed, so the interest portion falls and the principal portion rises every month.
Does a longer tenure reduce the cost of a loan?
No. A longer tenure lowers the monthly EMI but increases the total interest paid, often substantially. Choose the shortest tenure whose EMI you can comfortably afford.
What happens to my EMI when the repo rate changes?
For floating-rate loans linked to the repo rate, banks usually keep the EMI constant and change the tenure. You can ask the bank to change the EMI instead.
Can I claim tax benefit on home loan EMI?
Under the old regime, principal repaid qualifies under Section 80C (up to ₹1.5 lakh) and interest under Section 24(b) (up to ₹2 lakh for a self-occupied house). The new regime allows interest deduction only for let-out property.
Disclaimer: This tool is for general information and estimation only. Tax rates and rules change — verify with official sources or a professional before acting. Read full disclaimer.