What is EMI? Equated Monthly Installment Explained
How EMI Works
When you take a home loan, the bank does not expect you to repay the entire amount at once. Instead, the total loan amount plus interest is divided into equal monthly payments spread across your chosen loan tenure (typically 15 to 30 years for home loans). This fixed monthly payment is your EMI.
Each EMI has two components:
- Principal component: The portion that reduces your outstanding loan balance
- Interest component: The cost of borrowing money from the bank
In the early years of your loan, a larger share of each EMI goes toward interest. As the loan matures, the principal share gradually increases. This is because interest is calculated on the outstanding balance, which decreases as you make payments.
The EMI Formula
Where P = Principal loan amount, r = Monthly interest rate (annual rate / 12 / 100), n = Number of monthly installments (years x 12).
Example: EMI for a Fab Luxe 3 BHK
For the 3 BHK Type A priced at Price On Requestore with an 80% home loan (₹2.37 Crore), at 8.5% interest for 20 years, the EMI works out to approximately ₹2.06 Lakh per month. Over 20 years, you would pay a total of approximately ₹4.94 Crore, meaning ₹2.57 Crore goes toward interest alone.
Factors That Affect Your EMI
- Loan amount: Higher principal means higher EMI
- Interest rate: Even a 0.25% change can impact total cost by lakhs over the loan tenure
- Loan tenure: Longer tenure reduces EMI but increases total interest paid
- Type of interest: Fixed rate EMIs stay the same; floating rate EMIs change with market conditions
For detailed EMI calculations across different scenarios, read our complete EMI calculator guide. You can also use the interactive calculator on our homepage.