Loans
How EMI is calculated
The reducing-balance EMI formula, why early installments are mostly interest, and how to read an amortisation table.
Publisher: SmartCalculatorsLast updated: 17 August 2026
The standard formula
For a reducing-balance loan, EMI = P × r × (1 + r)^n / ((1 + r)^n − 1), where P is principal, r is the monthly rate and n is the number of months. If the rate is zero, EMI is simply P ÷ n.
Why interest dominates early years
Each EMI first covers that month’s interest on the outstanding principal. Early balances are high, so interest is high. Later EMIs retire more principal. The pie chart and yearly table on the EMI calculator show this split.
Related calculators
- EMI CalculatorFind monthly EMI, total interest and the full amortisation schedule for a loan.
- Home Loan CalculatorEstimate home loan EMI, total interest and the repayment schedule for a housing loan.
- Car Loan CalculatorEstimate car loan EMI, interest cost and tenure for a vehicle loan.
- Personal Loan CalculatorEstimate personal loan EMI and total interest for an unsecured reducing-balance loan.
- Loan Prepayment CalculatorSee how a lump-sum prepayment or extra EMI can reduce interest or shorten the loan.
Frequently asked questions
Does a lower EMI always mean a cheaper loan?
Not if the tenure is longer. Stretching the loan reduces the monthly number and usually increases total interest. Compare EMI, tenure and total interest together.
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