Key takeaways
- EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where r is the monthly rate and n the number of months.
- In the early months most of the EMI is interest; the principal share grows over time.
- A lower rate, a longer tenure or a smaller loan reduces the EMI.
The formula
EMI = P × r × (1 + r)n ÷ [(1 + r)n − 1]
- P = loan amount (principal)
- r = monthly interest rate = annual rate ÷ 12 ÷ 100
- n = number of monthly instalments
A worked example
Loan of ₹10,00,000 at 10.99% for 5 years (60 months):
- Monthly rate r = 10.99 ÷ 12 ÷ 100 ≈ 0.009158
- EMI ≈ ₹21,737
- Total payment = ₹21,737 × 60 ≈ ₹13,04,246, so total interest ≈ ₹3,04,246
In the first month, interest = ₹10,00,000 × 0.009158 ≈ ₹9,158, so only about ₹12,579 of the first EMI reduces the principal. By the last months, nearly the whole EMI goes towards principal. You can see this month by month in the schedule on the EMI calculator.
How to lower your EMI
- Negotiate a lower rate or move to a cheaper lender: see balance transfer.
- Increase the tenure. The EMI falls, but total interest rises.
- Borrow less by making a larger down payment.
- Prepay part of the loan to reduce future interest: reduce EMI or tenure?
Always check whether the quoted rate is flat or reducing: the real cost explained.
This article is for general information only and is not financial, legal or tax advice. Interest rates, fees and rules change, so confirm current terms with the lender or the regulator before you decide. Examples use illustrative figures. Last reviewed: October 2026.