Key Takeaways
- EMI depends on principal, monthly interest rate, and tenure.
- Early EMIs are mostly interest; later ones are mostly principal.
- A longer tenure lowers the EMI but raises total interest.
- The amortisation schedule shows this split month by month.
The EMI formula
Equated Monthly Instalment is calculated as:
EMI = P × r × (1 + r)n / [ (1 + r)n − 1 ]
where P is the principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the tenure in months.
How each EMI is split
Although the EMI stays the same each month, its composition changes. Early in the loan the outstanding balance is high, so most of the EMI goes toward interest. As the balance falls, more of each EMI repays principal. The EMI calculator shows this in a full amortisation schedule.
Effect of rate and tenure
A higher interest rate raises the EMI and the total interest. A longer tenure lowers the monthly EMI but, because you owe money for longer, increases the total interest paid over the life of the loan. Balancing affordability against total cost is the key decision.
Sources
We reference primary and official sources. Rate- and rule-dependent details must be verified against the latest official information.
Related Calculators
Related Guides
Fixed vs Floating Interest Rates
A fixed rate keeps your EMI constant regardless of market movements; a floating rate moves with a benchmark, so your EMI or tenure can change over time.
loansHow Loan Interest Works
Most loans charge interest on the reducing outstanding balance, so interest falls as you repay. A flat rate charges on the original amount throughout and is effectively costlier.
loansHow Loan Prepayment Works
Prepaying a loan reduces the outstanding principal, which lowers future interest. You can usually choose to shorten the tenure or reduce the EMI — shortening tenure saves the most interest.