The EMI Formula — Explained Simply
EMI = P × r × (1+r)ⁿ ÷ [(1+r)ⁿ − 1]
P = Principal, r = Monthly interest rate (annual ÷ 12), n = Total months
For ₹50L at 8.5% for 20 years: r = 8.5/12/100 = 0.00708, n = 240
EMI = 50,00,000 × 0.00708 × (1.00708)²⁴⁰ ÷ [(1.00708)²⁴⁰ − 1] = ₹43,391
EMI Comparison Table — ₹50 Lakh Loan
| Interest Rate | 10 Years | 15 Years | 20 Years | 30 Years |
|---|---|---|---|---|
| 7.5% | ₹59,375 | ₹46,351 | ₹40,280 | ₹34,983 |
| 8.0% | ₹60,664 | ₹47,783 | ₹41,822 | ₹36,688 |
| 8.5% | ₹61,993 | ₹49,238 | ₹43,391 | ₹38,446 |
| 9.0% | ₹63,338 | ₹50,713 | ₹44,986 | ₹40,231 |
| 9.5% | ₹64,703 | ₹52,212 | ₹46,607 | ₹42,056 |
Total Cost of Loan — The Shocking Truth
| Loan | Rate | Tenure | EMI | Total Paid | Total Interest |
|---|---|---|---|---|---|
| ₹30L | 8.5% | 20 yr | ₹26,035 | ₹62.5L | ₹32.5L |
| ₹50L | 8.5% | 20 yr | ₹43,391 | ₹1.04Cr | ₹54.1L |
| ₹50L | 8.5% | 30 yr | ₹38,446 | ₹1.38Cr | ₹88.4L |
| ₹75L | 8.5% | 20 yr | ₹65,087 | ₹1.56Cr | ₹81.1L |
A ₹50L loan for 30 years costs ₹88.4L in interest — you pay ₹1.38 crore to borrow ₹50 lakhs. This is why prepayment matters so much.
How to Reduce Your EMI Burden
- Higher down payment: 30% instead of 20% down reduces principal by 12.5%
- Shorter tenure: 15 years vs 20 saves ₹15.5L interest on ₹50L (though EMI is higher)
- Rate negotiation: 0.25% rate cut on ₹50L saves ₹1.7L over 20 years
- Balance transfer: If current rate is 0.5%+ above market — transfer your loan
- Regular prepayment: One extra EMI/year = ₹14L saved, 3.5 years less
💳 Calculate Your EMI
Use EMI Calculator →Q: Does paying more than EMI each month reduce principal?
Yes — if you pay more than your EMI in any month and specify it's toward principal, that excess directly reduces your principal. This is called an 'over-EMI payment' or 'top-up payment.' It's different from formal prepayment but has the same effect.
Q: My EMI changed when RBI changed rates — is that normal?
Yes — floating rate home loans are linked to repo rate (or MCLR/EBLR). When RBI raises rates, your bank's benchmark rises and your EMI or tenure increases. Banks usually extend tenure first, then increase EMI if tenure hits maximum. Check your loan statement after every RBI rate decision.
⚠️ Educational purposes only. Consult a qualified financial advisor for personalised advice.