Understanding EMIs and Loan Repayments
An Equated Monthly Installment (EMI) is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. EMIs are applied to both interest and principal each month, so that over a specified number of years, the loan is fully paid off.
The standard reducing-balance EMI formula is:
$$E = P \times r \times \frac{(1 + r)^n}{(1 + r)^n - 1}$$
Where:
- E is the monthly EMI.
- P is the principal loan amount.
- r is the monthly interest rate (annual rate / 12 / 100).
- n is the number of monthly installments.
Analyzing the Amortization Schedule
At the start of your loan term, a large percentage of your monthly EMI goes toward paying off the interest. As the outstanding principal balance decreases, the interest share drops, and a larger portion of the EMI directly reduces the remaining loan balance. This transition is visualized in our interactive yearly amortization breakdown table.