An Equated Monthly Instalment (EMI) is the fixed amount you repay each month on a loan. Understanding how it is split between principal and interest helps you make smarter borrowing decisions.
This guide explains EMI calculation.
What is How EMI is Calculated?
An EMI is calculated from three inputs: the loan amount (principal), the interest rate, and the tenure. Early EMIs are mostly interest, and the principal portion grows over time — a pattern called amortisation.
Prepaying early in the tenure saves the most interest.
| Inputs | Principal, interest rate, tenure |
|---|---|
| Early EMIs | Mostly interest |
| Later EMIs | Mostly principal |
| Prepayment | Saves most interest if done early |
Frequently asked questions
Why is most of my early EMI interest?
Because interest is charged on the outstanding balance, which is highest at the start; the principal component grows as the balance falls.
Does prepaying a loan help?
Yes, especially early in the tenure, when it cuts the outstanding principal and saves substantial interest.