Question 1

How is EMI calculated?

Accepted Answer

EMI (Equated Monthly Installment) is calculated using the reducing-balance formula: EMI = P × r × (1 + r)^n / ((1 + r)^n − 1), where P is the principal loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the loan tenure in months. This is the standard formula used by all Indian banks and NBFCs.

Question 2

What is the difference between flat rate and reducing balance EMI?

Accepted Answer

In a flat rate loan, interest is calculated on the original principal throughout the tenure. In a reducing-balance loan (used by all major Indian banks), interest is calculated only on the outstanding principal each month. Reducing-balance EMI is significantly cheaper — the effective interest rate on a flat rate loan can be nearly double the stated rate. This calculator uses the reducing-balance method.

Question 3

How can I reduce my EMI?

Accepted Answer

You can reduce your EMI by: (1) making a larger down payment to reduce the principal, (2) choosing a longer loan tenure (but total interest paid increases), (3) negotiating a lower interest rate with your lender, (4) making part-prepayments to reduce the outstanding principal and thereby future EMIs.

Question 4

What happens if I miss an EMI payment?

Accepted Answer

Missing an EMI payment typically triggers a late payment fee (usually 1–2% of the EMI amount per month), negatively impacts your CIBIL credit score, and may lead to the lender classifying the loan as an NPA (Non-Performing Asset) after 90 days of non-payment. Always contact your lender in advance if you anticipate a payment difficulty.

Question 5

Is the EMI fixed for the entire loan tenure?

Accepted Answer

For fixed-rate loans, the EMI remains constant throughout the tenure. For floating-rate loans (linked to MCLR or repo rate), the EMI may change when the benchmark rate changes. Your lender will notify you of any EMI revision.

Question 6

Can I prepay my loan to reduce total interest?

Accepted Answer

Yes, prepaying your loan reduces the outstanding principal, which reduces future interest. Most banks allow part-prepayment after a lock-in period (usually 6–12 months). For floating rate home loans, there is typically no prepayment penalty. For fixed rate loans, a penalty of 1–4% of the prepaid amount may apply.

Question 7

What is the EMI for a ₹10 lakh loan at 10% for 5 years?

Accepted Answer

For a ₹10,00,000 loan at 10% annual interest for 60 months: EMI = ₹21,247 per month. Total amount paid = ₹12,74,820. Total interest paid = ₹2,74,820. You can verify this in the calculator above by entering Principal: 1000000, Rate: 10, Tenure: 60 months.

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