EMI 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 monthly instalments.
Example
₹25 lakh home loan at 8.5% for 20 years: r = 0.00708, n = 240 → EMI ≈ ₹21,696. Total payment ₹52.07 lakh, of which ₹27.07 lakh is interest — more than the loan itself, which is why prepaying early matters.
How to reduce your EMI or interest
- Shorter tenure raises the EMI but cuts total interest sharply — compare 15 vs 20 years above.
- Prepay in the early years, when most of each EMI is interest (see the schedule).
- Negotiate the rate — a 0.5% lower rate on ₹25 lakh over 20 years saves about ₹1.9 lakh.
- Avoid long personal-loan tenures; rates of 11–16% compound painfully.
Typical rates (indicative)
| Loan | Rate range | Tenure |
|---|---|---|
| Home loan | 8–9.5% | 10–30 years |
| Car loan | 8.5–11% | 3–7 years |
| Two-wheeler | 9–14% | 1–4 years |
| Personal loan | 10.5–18% | 1–5 years |
| Education loan | 8.5–12% | 5–15 years |
Comparing with investing instead? See the SIP calculator and FD calculator.