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Calculate monthly EMI for home, car, or personal loans
EMI stands for Equated Monthly Instalment. Every month you pay the same fixed amount, but the split between principal and interest changes. Early EMIs are mostly interest; later EMIs are mostly principal. This is the reducing balance method — interest is charged only on the outstanding loan balance.
This is different from a flat rate loan (common in some personal loans and gold loans), where interest is calculated on the original principal for the entire tenure. A flat rate of 10% is actually equivalent to ~18–20% reducing balance rate. Always verify which method your lender uses — flat rate loans are always more expensive than they appear.
EMI is calculated using:
EMI = P × r × (1 + r)^n / [(1 + r)^n − 1]Where P = principal (loan amount), r = monthly interest rate (annual rate ÷ 12 ÷ 100), n = tenure in months.
Example: ₹30 lakh home loan at 9% for 20 years (240 months):
In the example above (₹30L at 9% for 20 years), here is how the EMI breaks down across the loan tenure:
Notice: in the first year, ₹22,500 of each ₹26,992 EMI goes to interest — only ₹4,492 reduces your loan. By year 15, principal repayment overtakes interest. This front-loading of interest is why prepayment in the early years is so powerful.
| Month | EMI (₹) | Interest (₹) | Principal (₹) | Balance (₹) |
|---|---|---|---|---|
| 1 | 26,992 | 22,500 | 4,492 | 29,95,508 |
| 12 | 26,992 | 22,137 | 4,855 | 29,54,246 |
| 60 | 26,992 | 20,504 | 6,488 | 27,32,888 |
| 120 | 26,992 | 17,593 | 9,399 | 23,42,272 |
| 180 | 26,992 | 12,934 | 14,058 | 17,18,272 |
| 240 | 26,992 | 201 | 26,791 | 0 |
Prepaying a home loan even once a year can dramatically reduce total interest paid. On the ₹30L, 9%, 20-year loan above:
Home loan prepayments have no penalty for floating rate loans (RBI regulation). For fixed rate loans, verify the prepayment clause. Always prepay the principal portion, not just pay extra towards an EMI — confirm with your bank that the excess amount reduces the outstanding principal.
| Prepayment Strategy | Loan Closed In | Total Interest Paid | Interest Saved |
|---|---|---|---|
| No prepayment | 20 years | ₹34,78,080 | — |
| ₹50,000/year extra | ~16.5 years | ₹27,40,000 est. | ~₹7,38,000 |
| ₹1L/year extra | ~14 years | ₹22,60,000 est. | ~₹12,18,000 |
| EMI+10% from start | ~17 years | ₹28,50,000 est. | ~₹6,28,000 |
Both use the same reducing balance EMI formula, but the economics are very different:
The car loan math is brutal: a ₹10 lakh car financed at 11% for 5 years costs ₹12.7 lakh total. Meanwhile, the car's market value drops to ₹4–5 lakh by the time you finish paying. Total wealth destruction: ~₹8 lakh on a ₹10 lakh purchase. If you must borrow for a car, shorten the tenure and maximise the down payment.
| Factor | Home Loan | Car Loan |
|---|---|---|
| Typical rate (2024–25) | 8.5–10% p.a. | 9–14% p.a. |
| Typical tenure | 10–30 years | 3–7 years |
| Asset appreciation | Usually appreciates over time | Depreciates ~15–20%/year |
| Tax benefit | Section 24B: ₹2L interest deduction | None for personal use |
| LTV ratio | Up to 90% of property value | Up to 85–90% of ex-showroom |
| Prepayment | No penalty on floating loans | Check for charges |
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rupiya.io is for research and education only. Calculations are estimates based on publicly available data. Not investment advice.