What is EMI? +
EMI (Equated Monthly Installment) is the fixed amount you pay monthly to repay your loan. It includes both principal and interest components. The EMI remains constant throughout the loan tenure, but the proportion of principal and interest changes with each payment.
How is EMI calculated? +
EMI is calculated using the formula: EMI = P × r × (1 + r)^n / ((1 + r)^n - 1), where:
- P is the principal loan amount
- r is the monthly interest rate (annual rate ÷ 12 ÷ 100)
- n is the total number of monthly payments (tenure in years × 12)
What factors affect my EMI? +
Your EMI is affected by three main factors:
1. Principal loan amount
2. Interest rate
3. Loan tenure (repayment period)
Higher principal or interest rate increases EMI, while longer tenure reduces EMI but increases total interest paid.
Can I reduce my EMI? +
Yes, you can reduce your EMI by:
1. Extending the loan tenure (though this increases total interest)
2. Making a larger down payment to reduce principal
3. Finding a loan with lower interest rates
4. Making partial prepayments when possible
What is amortization? +
Amortization is the gradual repayment of a loan through regular payments. An amortization schedule shows how each EMI payment is split between principal and interest, and how the loan balance decreases over time.