What is EMI?
EMI (Equated Monthly Installment) is the fixed monthly payment you make to repay a loan over a specified period. It includes both the principal amount and the interest.
EMI Formula
EMI = P × r × (1 + r)ⁿ / ((1 + r)ⁿ - 1) where P = Principal, r = monthly interest rate, n = number of months.
Tips to Reduce Your EMI
- Make a larger down payment to reduce the principal
- Choose a longer tenure (note: total interest paid increases)
- Negotiate a lower interest rate or refinance
- Make part-prepayments when you have surplus funds
Frequently Asked Questions
Does a longer tenure mean lower EMI?
Yes, but you pay significantly more total interest. Always balance monthly affordability with total cost.
What is a good EMI-to-income ratio?
Most financial advisors recommend keeping total EMIs below 40% of your monthly take-home salary.