What an EMI is made of
An EMI (equated monthly instalment) is the fixed amount you pay every month until a loan is closed. Each EMI covers that month's interest on the outstanding balance, and the rest reduces the principal. Early in the loan, the balance is high, so most of the EMI is interest; towards the end, most of it goes to principal. The amortisation table below the calculator shows this shift year by year.
EMI = P × i × (1 + i)^n ÷ [(1 + i)^n − 1]Worked example
Longer tenure: lower EMI, higher cost
Lenders often suggest the longest tenure because the EMI looks affordable. The trade-off is total interest, which rises sharply with every extra year. A good rule: pick the shortest tenure whose EMI you can pay comfortably, keeping all your EMIs under 40–50% of take-home pay.
Typical interest rates
| Loan type | Common range | Rate type |
|---|---|---|
| Home loan | 7.5–10% | Usually floating, linked to the repo rate |
| Car loan | 8.5–12% | Often fixed |
| Personal loan | 10.5–24% | Fixed |
| Two-wheeler loan | 10–20% | Fixed |
Your actual rate depends on your credit score, income and lender. Always compare the full cost, including processing fees, with the loan comparison calculator. If a lender quotes a "flat rate", convert it first on the flat vs reducing rate calculator.
Planning to pay extra when you can? See how much that saves on the loan prepayment calculator.
Frequently asked questions
Does EMI change during the loan?
For fixed-rate loans, no. For floating-rate loans, when the lender's rate changes it usually adjusts the tenure first and the EMI only if needed.
Is it better to reduce EMI or tenure after prepayment?
Reducing the tenure saves more interest. Reducing the EMI helps if your monthly budget is tight.
Does the EMI calculator include processing fees?
No. Fees are paid separately. Add them to the total cost when comparing loans.