An EMI (equated monthly instalment) is the fixed amount you pay the lender every month. It is calculated from three numbers: the loan amount, the interest rate and the tenure.
The formula
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1), where P is the loan amount, r the monthly interest rate (annual rate ÷ 12 ÷ 100) and n the number of months. For example, a loan of ₹50,00,000 at 8.5% for 20 years has an EMI of about ₹43,391.
Why the early years feel slow
Interest is charged on the balance outstanding, which is highest at the start. In the first years most of each EMI goes towards interest; the principal share grows over time.
Three ways to pay less interest
- Make part-prepayments when you receive a bonus — floating-rate home loans taken by individuals carry no prepayment penalty.
- Choose a shorter tenure if the EMI is comfortable; the total interest falls sharply.
- Increase your EMI slightly each year as your income grows.
Try different combinations in the EMI calculator in our Buyers Guide to see the effect instantly.
