How EMI is calculated
Banks use the formula EMI = P × r × (1+r)n ÷ ((1+r)n − 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of months.
Ways to pay less interest
- Choose a shorter tenure if the EMI fits your budget.
- Make part-prepayments early in the loan, when most of the EMI goes to interest.
- Compare rates across banks. A 0.5% lower rate on a 20-year loan saves lakhs.