How personal loan EMIs work
What goes into your monthly instalment and why the interest share falls over time.
An EMI (equated monthly instalment) is a fixed amount you pay every month until the loan is repaid. Each EMI contains two parts: interest on the outstanding balance, and repayment of principal.
In early months, a larger share of the EMI goes towards interest because the outstanding balance is highest. As the balance reduces, the principal share grows.
The standard formula is EMI = P × r × (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 months.
A longer tenure lowers the EMI but usually increases the total interest paid. Use an EMI calculator to compare scenarios before you apply.
This guide is for general education only and is not financial, tax or investment advice.
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