How EMI is calculated
Equated Monthly Instalment (EMI) uses the reducing-balance formula: EMI = P × r × (1+r)^n ÷ ((1+r)^n − 1), where P is the principal, r is the monthly interest rate, and n is the number of monthly instalments. Each EMI is the same amount, but early payments are mostly interest and later payments are mostly principal.
EMI vs. flat-rate interest
Some lenders quote a flat interest rate calculated on the full original principal for the whole term, which understates the real cost compared to reducing-balance EMI. Always check which method a lender uses before comparing offers.
Read the full breakdown in our guide: EMI Calculator Explained.