EMI stands for Equated Monthly Instalment — a fixed monthly payment you make to a lender until your loan is fully repaid. Each EMI covers both the interest accrued for the month and a portion of the principal. Under the reducing balance method, as the outstanding loan amount decreases, the interest component shrinks while the principal component grows, but the total EMI stays constant.

How is EMI calculated?

For the reducing balance method, the formula is: 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 total number of months. For the flat rate method: EMI = (P + P × R × T) / (T × 12), where R is the annual rate as a decimal and T is tenure in years.

What is the difference between flat rate and reducing balance?

With the reducing balance method, interest is calculated on the outstanding loan balance each month. As you repay, the balance falls, so you pay less interest over time — making it cheaper overall. With the flat rate method, interest is calculated on the original principal for the entire tenure regardless of how much you've repaid, making it more expensive. Most banks in India use the reducing balance method for home and car loans.

Does prepayment reduce EMI or tenure?

It depends on your lender's policy. Most banks apply a prepayment to reduce the remaining tenure while keeping the EMI constant — this saves the most interest. Some lenders let you choose to reduce the EMI instead. Use the Prepayment Simulator on this page to see exactly how much interest and how many months you can save with a one-time extra payment.

What happens if I miss an EMI?

Missing a loan payment typically incurs a late payment fee (commonly $25–50 or 1–5% of the payment due) and negatively impacts your credit score. Multiple missed payments can result in the loan being sent to collections, default status, and potential legal action. If you anticipate difficulty making a payment, contact your lender proactively — many offer hardship programs, deferment, or restructuring options that can prevent a formal default.

EMI Calculator

Calculate your monthly loan instalment instantly. Enter the loan amount, interest rate, and tenure — see your EMI, total interest payable, and a full repayment schedule in seconds.

Currency

Loan Amount ($)

$1,000$10,000,000

Annual Interest Rate

136

Loan Tenure

130

Calculation Mode

Monthly EMI

$2,052

Total Interest

$23,099

18.8% of total

Total Payment

$123,099

Principal + Interest

Principal vs Interest

Principal

$100,000 (81.2%)

Interest

$23,099 (18.8%)

Outstanding Balance by Year

Yr 1

$83,237

Yr 2

$64,993

Yr 3

$45,135

Yr 4

$23,523

Yr 5

Amortization Schedule

Month	EMI	Principal	Interest	Balance
1	$2,052	$1,343	$708	$98,657
2	$2,052	$1,353	$699	$97,304
3	$2,052	$1,362	$689	$95,941
4	$2,052	$1,372	$680	$94,569
5	$2,052	$1,382	$670	$93,188
6	$2,052	$1,392	$660	$91,796
7	$2,052	$1,401	$650	$90,395
8	$2,052	$1,411	$640	$88,983
9	$2,052	$1,421	$630	$87,562
10	$2,052	$1,431	$620	$86,130
11	$2,052	$1,442	$610	$84,689
12	$2,052	$1,452	$600	$83,237

What is EMI?

An Equated Monthly Instalment (EMI) is a fixed amount you pay to your lender every month until the loan is fully repaid. Each payment covers both the interest accrued for the month and a portion of the principal. As the loan balance reduces over time (under the reducing balance method), the interest component decreases while the principal component increases — keeping the monthly EMI constant throughout.

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Why use our online EMI Calculator?

Calculate exact EMI (Equated Monthly Instalment) for any loan with a full amortization schedule. Adjust principal, interest rate, and tenure to compare repayment scenarios instantly.

How to use EMI Calculator

1
Enter your loan amount
Use the slider or type the principal amount directly into the number input. Both stay in sync. Indian lakh/crore formatting is applied automatically for INR.
2
Set the annual interest rate
Drag the rate slider or type the rate (e.g. 8.5). Rates between 1% and 36% are supported in steps of 0.1%.
3
Choose the tenure
Enter the loan duration in years or months using the toggle. The tool converts to months internally for all calculations.
4
Select a calculation mode
Choose Reducing Balance (standard bank method — interest on outstanding balance) or Flat Rate (interest on original principal). Hover the ? icon for a detailed explanation.
5
Read your results
Your monthly EMI, total interest payable, and total payment appear instantly. Scroll down for the principal vs interest chart, year-wise balance chart, prepayment simulator, and the full amortization table.

Reducing balance vs flat rate — the true cost difference

The reducing balance method (also called diminishing balance) calculates interest on the outstanding loan balance each month. As you repay principal, the balance falls, so the interest portion of each EMI decreases over time while the principal portion increases — though the total EMI stays constant. This is the method used by most banks in India and internationally for home loans, car loans, and personal loans.

The flat rate method calculates interest on the original principal for the entire loan tenure, regardless of how much you have already repaid. A ₹1,00,000 loan at 12% flat rate for 2 years charges interest on ₹1,00,000 every month for 24 months — even in month 23 when you might only owe ₹10,000.

The effective annual rate (EAR) of a flat rate loan is roughly 1.8× the stated flat rate. A loan advertised at "12% flat rate" has an effective cost of approximately 21–22% per annum — comparable to an expensive credit card. Microfinance institutions and some consumer finance companies quote flat rates because the lower number sounds more attractive. Always compare loans on an effective rate or APR basis, never on the face rate alone.

How amortization works — why early payments are almost all interest

Loan amortization describes the gradual process of paying down principal through fixed periodic payments. In a reducing balance loan, each EMI covers two components: interest on the current outstanding balance and a portion of the principal. In early months, the outstanding balance is high, so the interest portion consumes most of the EMI. The principal repayment is small.

As months pass and principal is repaid, the outstanding balance drops, reducing the interest component and increasing the principal component — while the EMI total stays fixed. This is why prepayment is so powerful in early years: an extra payment in year 1 reduces the principal immediately, cutting the base on which interest is calculated for all remaining months. The same extra payment in year 10 of a 20-year loan saves much less interest because most of the loan term has already passed.

A visual way to understand this: plot interest and principal as two lines across the loan tenure. At origination, interest is high and principal repayment is low. The two lines cross near the halfway point of the tenure. After that point, you are repaying more principal than interest each month. This crossover point is why a 30-year mortgage accrues so much total interest — you are paying mostly interest for the first 15 years.

Prepayment strategies — how to minimize total interest paid

Prepayment reduces your outstanding principal, which directly lowers the interest that accrues in all subsequent months. The earlier in the loan tenure you prepay, the more interest you save — because the saved interest compounds forward over more remaining months.

Most Indian banks allow one-time prepayments (part-prepayment or foreclosure) on floating rate home loans without penalty, as mandated by the RBI since 2012. Fixed rate loans and other loan types may carry prepayment penalties — check your loan agreement before making extra payments.

When you make a part-prepayment, banks typically offer two options: reduce the EMI (keep tenure the same, lower monthly payment) or reduce the tenure (keep EMI the same, finish the loan sooner). Choosing to reduce tenure saves significantly more total interest because you stop paying for more months. Reducing the EMI saves less total interest but improves monthly cash flow. Use the Prepayment Simulator in this tool to see the exact savings under both options for your loan.

Frequently Asked Questions

What is EMI?: EMI stands for Equated Monthly Instalment — a fixed monthly payment you make to a lender until your loan is fully repaid. Each EMI covers both the interest accrued for the month and a portion of the principal. Under the reducing balance method, as the outstanding loan amount decreases, the interest component shrinks while the principal component grows, but the total EMI stays constant.
How is EMI calculated?: For the reducing balance method, the formula is: 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 total number of months. For the flat rate method: EMI = (P + P × R × T) / (T × 12), where R is the annual rate as a decimal and T is tenure in years.
What is the difference between flat rate and reducing balance?: With the reducing balance method, interest is calculated on the outstanding loan balance each month. As you repay, the balance falls, so you pay less interest over time — making it cheaper overall. With the flat rate method, interest is calculated on the original principal for the entire tenure regardless of how much you've repaid, making it more expensive. Most banks in India use the reducing balance method for home and car loans.
Does prepayment reduce EMI or tenure?: It depends on your lender's policy. Most banks apply a prepayment to reduce the remaining tenure while keeping the EMI constant — this saves the most interest. Some lenders let you choose to reduce the EMI instead. Use the Prepayment Simulator on this page to see exactly how much interest and how many months you can save with a one-time extra payment.
What happens if I miss an EMI?: Missing a loan payment typically incurs a late payment fee (commonly $25–50 or 1–5% of the payment due) and negatively impacts your credit score. Multiple missed payments can result in the loan being sent to collections, default status, and potential legal action. If you anticipate difficulty making a payment, contact your lender proactively — many offer hardship programs, deferment, or restructuring options that can prevent a formal default.

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