Question 1

What is an EMI?

Accepted Answer

EMI stands for Equated Monthly Instalment. It is the fixed amount you pay your lender every month until the loan is fully repaid, covering both principal and interest.

Question 2

How is EMI calculated?

Accepted Answer

EMI = P x r x (1+r)^n / ((1+r)^n - 1), where P is the loan amount, r is the monthly interest rate, and n is the number of monthly instalments. This is the reducing-balance method used by most lenders.

Question 3

Does a longer tenure reduce my EMI?

Accepted Answer

Yes, a longer tenure lowers the monthly EMI, but you pay more total interest over the life of the loan. A shorter tenure means a higher EMI but lower total interest.

Question 4

What is an amortisation schedule?

Accepted Answer

It is a year-by-year breakdown showing how much of each payment goes towards principal and interest, and the outstanding balance. Early EMIs are mostly interest; later EMIs are mostly principal.

Year	Principal Paid	Interest Paid	Balance
Yr 1	₹1.62 L	₹92,696	₹8.38 L
Yr 2	₹1.79 L	₹75,705	₹6.58 L
Yr 3	₹1.98 L	₹56,934	₹4.60 L
Yr 4	₹2.19 L	₹36,198	₹2.42 L
Yr 5	₹2.42 L	₹13,290	₹0

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