How EMI is calculated
For a standard reducing-balance loan, the EMI (equated monthly instalment) is P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of months. Early payments are mostly interest; over time more of each payment goes to principal.
Ways to pay less interest
- Prepay early. Extra payments in the first years save the most because they cut the balance that interest is charged on.
- Shorten the tenure. A higher EMI over fewer years reduces total interest sharply.
- Negotiate the rate and fees. A small rate difference is worth thousands over a long loan.
- Check prepayment rules. Some lenders charge a fee for early repayment.
Use the prepayment boxes above to see exactly how much interest and time you can save. For budgeting around a loan, read our 50/30/20 budget guide.