EMI stands for Equated Monthly Instalment. It's the fixed amount you pay your lender each month until you repay the loan.
"Equated" is the important word. The amount stays the same each month, but what it pays for changes. In the first month, most of your EMI goes to interest. By the last month, almost all of it goes to principal. That shift explains most of what surprises people about loans, including why paying early saves less than expected late in the tenure and why a longer tenure costs more than it looks.
What goes into an EMI when you personal loan apply online?
Every EMI has two parts:
Principal: the portion that reduces what you owe- Interest: the lender's charge on the balance still outstanding
Three inputs decide the amount:
- Loan amount: how much you borrow
- Interest rate: the annual rate on the loan
- Tenure: how many months you take to repay
You won't need to use it by hand. The Prefr Personal Loan EMI calculator does it as you move the sliders.
A worked example using a monthly EMI calculator
Take ₹2,00,000 at 18% per annum over 18 months. The EMI is ₹12,761. Over 18 months, you repay ₹2,29,698, of which ₹29,698 is interest.
Here's how the same ₹12,761 is divided across the tenure:
| Month | Interest paid | Principal paid | Balance after EMI |
|---|---|---|---|
| 1 | ₹3,000 | ₹9,761 | ₹1,90,239 |
| 2 | ₹2,854 | ₹9,908 | ₹1,80,331 |
| 6 | ₹2,246 | ₹10,516 | ₹1,39,192 |
| 9 | ₹1,765 | ₹10,996 | ₹1,06,690 |
| 12 | ₹1,263 | ₹11,498 | ₹72,703 |
| 18 | ₹189 | ₹12,573 | ₹0 |
In month one, interest takes ₹3,000, which is 1.5% of the full ₹2 lakh. By month 18, it takes ₹189 because the balance is almost gone.
Two things follow. Halfway through the tenure, you've paid off less than half the principal: after 9 months, ₹1,06,690 is still outstanding. And because most of the interest falls in the early months, prepaying early saves much more than prepaying near the end.
This month-by-month table is called an amortisation schedule. Your lender should give you one with the loan agreement.
Reducing balance vs flat rate
The example above uses the reducing-balance method. Interest is charged only on what you still owe, so it falls as you repay. Personal loans from regulated lenders usually work this way, and so does Prefr's calculator.
A flat rate charges interest on the original amount for the whole tenure, however much you've repaid. The difference at the same headline rate:
| Method | Monthly EMI | Total interest |
|---|---|---|
| Reducing balance, 18% | ₹12,761 | ₹29,698 |
| Flat rate, 18% | ₹14,111 | ₹54,000 |
Same loan, same stated rate, and the flat-rate version costs about ₹24,000 more. If an offer quotes a rate without saying which method it uses, ask before you accept.
What changes your EMI in a personal loan EMI calculator?
- Loan amount: The EMI rises in proportion. Double the amount and, at the same rate and tenure, the EMI doubles.
- Interest rate: A higher rate raises both the EMI and the total interest. Personal loan interest rates are set by your credit profile. Through Prefr's lending partners, they range from 18% to 30% per annum. Our guide to personal loan interest rates and eligibility explains what moves yours.
- Tenure: This works both ways. A longer tenure lowers the EMI and raises the total interest, because the balance stays outstanding for longer. A shorter one does the opposite. For how to choose between them, see our guide on planning your EMI before applying.
EMI, interest rate and APR are different numbers
The EMI is what you pay each month. The interest rate decides how much of that goes to the lender as interest. Neither includes the processing fee.
The fee and GST are deducted when the loan is disbursed, so you receive less than the loan amount while your EMIs are calculated on the full amount. That's why lenders must state the APR in the Key Fact Statement. The APR includes the fee and is the number to use when comparing two offers.
When do EMIs start, and how are they paid?
Your first EMI is usually due on a fixed date in the month after disbursal. Some lenders also charge broken-period interest for the days between disbursal and the start of your first EMI cycle. If they do, it's listed in your Key Fact Statement.
EMIs are collected automatically through an e-mandate, usually eNACH, which you set up during the application with net banking or a debit card. The amount is debited from your bank account on the due date. Keep enough balance in the account a day ahead, because a failed debit counts as a missed payment even if the money arrives later that day.
Our step-by-step personal loan application guide covers the mandate setup.
If you miss an EMI
Missing one EMI has several effects:
- A late payment charge, stated in your loan agreement
- A bounce charge from your bank, if the mandate debit fails
- A report to the credit bureaus, which lowers your credit score
- Extra interest on the overdue amount
A single missed payment stays on your credit report and affects how the next lender prices your loan. If you can see a problem coming, contact your lender before the due date. They have more options then than after a miss.
Read More - CIBIL Score for Personal Loan: Free Check & Minimum Score
Paying early: prepayment and foreclosure
Part-prepayment is paying a lump sum on top of your EMIs. It reduces the principal, which usually shortens the tenure while the EMI stays the same. Some lenders let you choose a lower EMI instead.
Foreclosure is paying off the entire outstanding balance and closing the loan.
Both can save interest, and both may carry a charge set out in your loan agreement. Because interest is concentrated early in the tenure, the savings are greatest in the first months. In the example above, closing the loan after month 12 saves the interest on the remaining ₹72,703. Closing after month 17 saves almost nothing.
Working out your own EMI using a personal loan EMI calculator
Enter your numbers in the Prefr EMI calculator. It shows the monthly EMI, the total interest and the full amount you'll repay for any loan amount between ₹51,000 and ₹5,00,000.
With Prefr, you can apply fully online for loans up to ₹5 lakh, with tenures from 6 to 60 months, subject to eligibility. Approval is instant. Disbursal typically completes within 30 minutes and can take up to 24 hours depending on your lending partner.
Frequently Asked Questions
Does my EMI change during the loan?
Why is so much of my early EMI going to interest?
Is a lower EMI better?
Does the EMI include the processing fee?
When is the best time to prepay a personal loan?
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