Home Loan Tip
Making one extra EMI payment every year or increasing your EMI by 5% annually can reduce your 20-year loan tenure by over 5 years.
Payment Breakdown
What is an EMI?
An **Equated Monthly Installment (EMI)** is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. EMIs are used to pay off both interest and principal each month, so that over a specified number of years, the loan is paid off in full.
Components of EMI
Every EMI you pay consists of two parts: the **Principal** amount (the actual money borrowed) and the **Interest** (the cost of borrowing). In the early years of your loan, a larger portion of the EMI goes toward interest, whereas in the later years, more of it goes toward principal repayment.
Reducing Balance Method
This calculator uses the **Monthly Reducing Balance** method, which is the standard used by banks like SBI, HDFC, and ICICI for home and car loans in India.