Personal FinanceBeginner
EMI
Equated Monthly Instalment
The fixed monthly payment that repays a loan's interest and principal over its tenure.
Detailed explanation
The instalment stays constant, but its split changes: early EMIs are mostly interest, and the principal share rises over time. Extending the tenure lowers the EMI but sharply increases total interest paid.
Formula
EMI = P × r × (1 + r)^n / ((1 + r)^n − 1), where r = annual rate / 12
Example
₹50,00,000 at 8.5% for 20 years gives an EMI of about ₹43,391 and total interest of roughly ₹54.1 lakh.
Why it matters
Comparing loans on EMI alone is misleading — total interest over the tenure is the real cost.
Key points
- Prepaying early cuts interest the most.
- Floating rates usually adjust the tenure, not the EMI.
- Keep total EMIs well within a comfortable share of take-home pay.
Related tool
Home loan EMI calculatorRelated terms
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.