Does higher tenure reduce EMI?

Yes — doubling tenure roughly halves the EMI but nearly doubles total interest paid.

Is fixed or floating rate better?

Fixed rates offer certainty; floating rates track RBI repo rate. Floating is usually lower initially but variable.

EMI Calculator Guide: How to Calculate Loan EMI in India

Quick Answer

EMI = P x r x (1+r)^n / ((1+r)^n - 1), where P is loan amount, r is monthly interest rate, and n is months. A Rs 30 lakh home loan at 8.5% for 20 years gives an EMI of about Rs 26,035, with total interest of roughly Rs 32.5 lakh over the tenure.

What Is an EMI? Everything You Need to Know

EMI (Equated Monthly Instalment) is the fixed monthly payment you make to repay a loan. Every EMI consists of two parts:

Principal component: The portion that reduces your actual loan balance. In early EMIs, this is small.

Interest component: The cost of borrowing. In early EMIs, this is large.

As you repay the loan, the interest component shrinks and the principal component grows — this is called loan amortisation.

The EMI Formula Explained

EMI = P × r × (1+r)^n / [(1+r)^n - 1]

Where:

P = Principal loan amount
r = Monthly interest rate = Annual rate ÷ 12 ÷ 100
n = Loan tenure in months

Example: Home loan of ₹50 lakh at 8.5% for 20 years:

r = 8.5 / 12 / 100 = 0.007083
n = 20 × 12 = 240 months
EMI = 50,00,000 × 0.007083 × (1.007083)^240 / [(1.007083)^240 - 1]
EMI = ₹43,391/month

Current Loan Interest Rates in India (2026)

Loan Type

Best Rate

Typical Rate

Factors

|---|---|---|---|

Home Loan (SBI/HDFC)	8.35%	8.5–9.5%	CIBIL score, income, LTV
Home Loan (NBFCs)	9.5%	10–13%	Higher for lower scores
Car Loan	8.5%	9–12%	New vs used, brand
Personal Loan (top banks)	10.5%	12–18%	Depends heavily on CIBIL
Personal Loan (fintech)	14%	18–36%	For lower credit scores
Gold Loan	7%	8–12%	LTV ratio
Education Loan	8%	9–14%	College tier matters
Two-Wheeler Loan	9.7%	11–15% \|

Pro tip: A CIBIL score above 750 can reduce your home loan rate by 0.25–0.75% compared to a score of 650. On a ₹50 lakh loan for 20 years, even 0.5% lower rate saves ₹3.9 lakh in total interest.

EMI vs Loan Tenure: The Trade-off

For a ₹30 lakh loan at 9% interest:

Tenure

Monthly EMI

Total Interest

Total Paid

|---|---|---|---|

5 years	₹62,283	₹7.37L	₹37.37L
10 years	₹37,980	₹15.58L	₹45.58L
15 years	₹30,428	₹24.77L	₹54.77L
20 years	₹26,993	₹34.78L	₹64.78L

Key insight: Choosing 20 years over 5 years saves ₹35,290 in monthly outflow but costs an additional ₹27.41 lakh in total interest paid over the loan life.

Part-Prepayment: The Most Effective Way to Save on Loans

Banks allow partial prepayment on floating-rate home loans without penalty (by RBI mandate). Each prepayment directly reduces your principal, drastically cutting future interest.

Example: ₹50 lakh home loan at 8.5% for 20 years (EMI = ₹43,391)

If you prepay ₹2 lakh after year 2:

Interest savings: ₹6.8 lakh
Loan closes 18 months early

If you prepay ₹5 lakh after year 2:

Interest savings: ₹17 lakh
Loan closes 4 years early

Optimal strategy: Use annual bonus, incentives, or maturing FDs for prepayment. Even 1–2 prepayments in the first 5 years of a loan dramatically reduce the total interest burden.

MCLR, RLLR, and Fixed Rate: Understanding Your Loan

Fixed rate: EMI doesn't change during the loan tenure. Protects against rate rises but you don't benefit when rates fall.

MCLR-linked (Marginal Cost of Funds Lending Rate): Older floating rate structure. Resets every 6 or 12 months. Slow to pass on RBI rate cuts.

RLLR/EBR (External Benchmark Linked Rate): Linked to RBI repo rate. Must reset at least once per quarter. Fastest transmission of RBI rate changes. All home loans from October 2019 onwards must be RLLR-linked.

Current Recommendation: For new home loans, choose RLLR-linked floating rate — rates are expected to decline in 2024-25 as RBI begins cutting rates.

Loan Eligibility: What Banks Check

Banks typically lend up to 60–65 times your monthly net salary for home loans:

Monthly net income: ₹60,000
Maximum EMI they'll allow: 40–50% of income = ₹24,000–₹30,000
At 8.5% for 20 years, EMI of ₹27,000 corresponds to a loan of ~₹31.2 lakh

For higher loans, co-applicant income (spouse) is combined, significantly increasing eligibility.

FOIR (Fixed Obligation to Income Ratio): Total existing EMIs + proposed EMI should not exceed 40–55% of gross monthly income. This is the primary eligibility criterion across banks.