What is EMI?
An equated monthly instalment: a fixed payment that covers both the interest accrued that month and some repayment of principal.
Because the principal shrinks each month, the interest portion falls and the principal portion grows, even though the payment itself never changes. On a twenty-year loan at 8.5% the first year is about 81% interest.
E = P · i(1+i)^n / ((1+i)^n − 1)Not to be confused with Simple interest instalment
An EMI charges interest on the reducing balance. A flat or simple-interest instalment charges it on the original principal for the whole term, which costs substantially more for the same quoted rate.