Requirements used
- Reducing balance
- Schedule
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Frequently asked questions
How is EMI calculated?
EMI = P × r × (1+r)^n ÷ ((1+r)^n − 1), where P is the loan amount, r is the monthly rate (annual rate ÷ 12 ÷ 100) and n is the number of months.
Is the interest on a reducing balance?
Yes. Each month's interest is charged on the outstanding principal, which is how banks quote home, car and personal loans. Flat-rate quotes give a different, higher effective rate.
Why do the first EMIs mostly pay interest?
Interest is a percentage of a large balance at the start, so most of each early EMI is interest. The principal share grows as the balance falls. The schedule shows the split.
Does it include processing fees?
No. Fees, insurance and taxes are excluded. Results are estimates for planning, not financial advice.