Before signing any loan agreement — home loan, car loan, or personal loan — you need to know exactly what your monthly EMI (Equated Monthly Instalment) will be. Bank websites can be confusing, and salespeople sometimes quote optimistic numbers. A free EMI calculator gives you the exact figure in seconds.
The EMI Formula (Reducing Balance Method)
Indian banks use the reducing balance method with monthly compounding: EMI = P × r × (1+r)^n / ((1+r)^n − 1), where P=principal, r=monthly interest rate, n=number of months. Every EMI pays some interest and some principal — early EMIs are mostly interest.
Current Interest Rates (2026)
- Home Loan: 8.40% - 9.50% (SBI, HDFC, ICICI, Axis)
- Car Loan: 8.70% - 10.50% (depends on credit score)
- Personal Loan: 10.50% - 18% (unsecured, based on CIBIL)
How Prepayment Saves Lakhs
If you prepay ₹1,00,000 on a ₹50L home loan at 8.5% with 20 years remaining, you save approximately ₹1,85,000 in interest and reduce tenure by 1 year and 8 months. Use the Loan EMI Calculator to run prepayment scenarios.
Pro tip: Prepaying in the early years of the loan saves the most interest, because the outstanding principal is highest and interest is calculated on that balance.
FAQs
Is EMI calculated on simple or compound interest?
Reducing balance with monthly compounding — the standard used by all Indian banks. Interest is charged on the remaining principal each month.
Can I change my EMI amount later?
You can partially prepay to reduce EMI or tenure. Some banks allow switching from reducing EMI to reducing tenure at any time.
What CIBIL score is needed for a home loan?
750+ for the best rates. Below 700 may result in higher rates or rejection.