Loan EMI Calculator Guide + Amortization Schedule
EMI (Equated Monthly Installment) is the backbone of most home loans, car loans, and personal loans. It allows borrowers to repay in fixed monthly amounts instead of one large lump sum. But behind that fixed EMI lies a changing balance of interest and principal repayment. Understanding this split, and using an amortization schedule, can save you lakhs in total interest through smart prepayments.
What is EMI?
An EMI is a fixed monthly payment you make to the lender. Each EMI consists of two parts:
- Interest: the cost of borrowing, highest in the early years.
- Principal: the actual loan amount you repay, which grows larger with each installment.
Although the EMI remains the same, the ratio of interest vs. principal changes month by month. This shift is what makes prepayment planning so powerful.
How is EMI Calculated?
The standard EMI formula is:
EMI = P × r × (1+r)^n / ((1+r)^n − 1)
Where:
- P = Loan principal (amount borrowed)
- r = Monthly interest rate (annual rate ÷ 12 ÷ 100)
- n = Number of monthly installments
Worked Example
Suppose you take a home loan of ₹10,00,000 at 8% annual interest for 10 years (120 months).
- P = 10,00,000
- r = 8% ÷ 12 = 0.00667 (approx)
- n = 120
Plugging into the formula, EMI ≈ ₹12,133.
Amortization Schedule (First 5 Months)
An amortization schedule shows how much of each EMI goes toward interest and principal.
| Month | Opening Balance | Interest | Principal | EMI | Closing Balance |
|---|---|---|---|---|---|
| 1 | 10,00,000 | 6,667 | 5,466 | 12,133 | 9,94,534 |
| 2 | 9,94,534 | 6,630 | 5,503 | 12,133 | 9,89,031 |
| 3 | 9,89,031 | 6,593 | 5,540 | 12,133 | 9,83,491 |
| 4 | 9,83,491 | 6,556 | 5,577 | 12,133 | 9,77,914 |
| 5 | 9,77,914 | 6,519 | 5,614 | 12,133 | 9,72,300 |
Notice how the interest gradually decreases while the principal portion increases with each EMI.
Why Use an EMI Calculator?
Manually calculating EMIs is tedious. An online loan EMI calculator instantly provides:
- Exact EMI amount
- Total interest payable over the loan
- Total repayment amount
- Month-by-month amortization schedule
Having this schedule lets you test “what if” scenarios — like paying an extra ₹50,000 in year 2, or comparing 15 vs. 20-year tenures.
Smart Prepayment Strategies
Prepayments can cut years off your loan and save significant interest. But how and when you prepay makes all the difference:
- Prepay early: Since early EMIs are interest-heavy, lump-sum prepayments in the first few years maximize savings.
- Tenure reduction: Opting to reduce tenure rather than EMI ensures you pay off faster and save more interest overall.
- Small regular prepayments: Even adding one extra EMI every year can knock off several years from a long home loan.
- Check fees: Some banks levy prepayment charges—factor these in before deciding.
Key Takeaways
- EMIs combine interest + principal, but the ratio changes monthly.
- An amortization schedule helps visualize loan repayment.
- Prepaying early and choosing tenure reduction saves the most money.
- Always compare scenarios with an EMI calculator before making a decision.