EMI (Equated Monthly Installment) is the standard repayment structure for home loans, car loans, and personal loans in India and many Asian markets.
EMI Formula
EMI = [P × r × (1+r)^n] / [(1+r)^n − 1], where P = principal, r = monthly rate, n = total months.
Flat vs. Reducing Rate
- Flat rate: Interest calculated on original principal throughout (more expensive)
- Reducing rate: Interest calculated on outstanding balance (standard for banks)
A 10% flat rate is roughly equivalent to an 18–20% reducing rate. Always compare reducing rates.