Question 1

What is EMI?

Accepted Answer

EMI (Equated Monthly Installment) is the fixed monthly amount paid to repay a loan including 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=principal, r=monthly interest rate, n=number of months.

Question 3

Does prepayment reduce EMI?

Accepted Answer

Yes, prepaying reduces your principal, which can lower either your EMI or loan tenure depending on your bank.

Question 4

What is a good EMI-to-income ratio?

Accepted Answer

Ideally keep total EMIs below 40% of monthly income (the 40% rule).

EMI Calculator