Last updated: 2026-10-21
What is an EMI?
An EMI (Equated Monthly Instalment) is the fixed amount you pay your bank every month until the loan is repaid. Each EMI has two parts: interest on the balance still owed, and principal, which reduces the loan. In the early years, most of your EMI goes to interest. Over time, more of it goes towards the principal.
EMI formula
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1)
- P = loan amount
- r = monthly interest rate (yearly rate ÷ 12 ÷ 100)
- n = number of monthly instalments
Example: a ₹50 lakh home loan at 8.5% for 20 years. r = 8.5 ÷ 12 ÷ 100 = 0.007083 and n = 240. EMI ≈ ₹43,391. Over 20 years you pay about ₹54.1 lakh in interest, more than the loan itself.
How to lower your EMI or total interest
- Pay a little extra each month. On the loan above, just ₹5,000 extra a month clears it about 4½ years earlier and saves about ₹13.9 lakh in interest. Try it in the calculator.
- Make a bigger down payment so you borrow less.
- Compare rates and ask for a better one. Even 0.5% lower makes a big difference on a long loan. A good credit score (750+) helps.
- Choose a shorter tenure if you can afford a higher EMI. You'll pay much less interest overall.
- Switch lenders (balance transfer) if another bank offers a clearly lower rate. Check the processing fee first.
Typical interest rates
| Loan type | Usual range (yearly) | Usual tenure |
|---|---|---|
| Home loan | 7.5% – 10% | Up to 30 years |
| Car loan | 8.5% – 12% | Up to 7 years |
| Education loan | 8% – 13% | Up to 15 years |
| Personal loan | 10.5% – 24% | Up to 5 years |
Rates vary by lender, your credit score and the RBI repo rate. Check the latest rate with your bank.
Frequently asked questions
Does paying extra really reduce my loan?
Yes. Extra payments go straight to the principal, so the balance falls faster and less interest is charged every month after that. Most banks don't charge a fee for prepaying a floating-rate home loan taken by an individual.
Is it better to reduce EMI or tenure after a prepayment?
Reducing the tenure usually saves more interest. Reducing the EMI is better if you want more room in your monthly budget. This calculator keeps the EMI the same and shows how much sooner you finish.
Why is most of my early EMI going to interest?
Interest is charged on the balance you still owe. At the start, the balance is highest, so the interest part is largest. As you repay, the interest part shrinks and the principal part grows.
Can I claim tax benefits on my home loan?
In the old tax regime, you can claim up to ₹2 lakh a year of interest on a self-occupied home under Section 24(b), and principal repayment under 80C (within the ₹1.5 lakh limit). Use our income tax calculator to see if the old regime then saves you more.
Does this calculator include processing fees or insurance?
No. It shows the EMI on the loan amount alone. Add any fees or insurance premium you're financing to the loan amount if you want them included.
See whether its interest and principal make the old tax regime cheaper for you.