What is EMI?
EMI (Equated Monthly Instalment) is the fixed amount you pay your lender every month until the loan is fully repaid. Each EMI contains two parts — interest on the outstanding balance and principal repayment. In the early years most of the EMI goes towards interest; later, a larger share repays the principal.
EMI formula
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1)
- P = principal loan amount
- r = monthly interest rate (annual rate ÷ 12 ÷ 100)
- n = number of monthly instalments
Example: a ₹10,00,000 loan at 9% for 10 years gives an EMI of about ₹12,668, with total interest of roughly ₹5,20,000.
How to reduce your EMI
- Increase the tenure — lowers EMI but increases total interest.
- Make a larger down payment to borrow less.
- Negotiate the interest rate using a good CIBIL score (750+).
- Prepay whenever you have surplus funds to reduce the outstanding principal.
EMI planning for business owners
Planning to fund a new website, software or marketing campaign with a business loan? Compare the EMI with the expected monthly returns. A good rule of thumb: the extra monthly profit from the investment should comfortably exceed the EMI. Use our ROI calculator to estimate returns.