Monthly EMI
Total Interest Payable
Total Payment (Prin + Int)
Principal vs Interest Overview
Month-by-Month Repayment Schedule
See how your principal portion increases and interest portion decreases every month.
| Month # | Opening Balance | EMI | Interest Paid | Principal Paid | Closing Balance |
|---|
What is the Monthly Reducing Balance Method?
In the monthly reducing balance method, the interest you pay every month is calculated only on the outstanding loan principal at the end of the previous month.
This is the standard calculation method used by almost all banks and NBFCs in India for Home Loans, Personal Loans, and Car Loans. Every time you pay an EMI, a portion goes toward the interest generated that month, and the rest goes toward reducing your initial principal. Because the principal keeps reducing ("reducing balance"), the interest charged in subsequent months also decreases.
Reducing Balance vs Flat Rate
- Flat Rate: Interest is calculated on the original full loan amount for the entire tenure, making it much more expensive.
- Reducing Rate: Interest is only calculated on what you currently owe, making it significantly cheaper.
Example: A 10% Flat Rate is roughly equivalent to an 18% Reducing Rate. This calculator assumes the standard Reducing Rate method.
Frequently Asked Questions
Why does my early EMI go mostly toward interest?
In early months, your outstanding principal is high, so the interest generated for that month is also high. Thus, a large chunk of your fixed EMI covers just the interest. As the balance drops over time, the interest portion shrinks, and more of the EMI goes toward clearing the principal.
Can I save money using this method?
Yes, making part-prepayments reduces the outstanding principal immediately. Because interest is calculated on the reducing balance, your total interest payout over the loan's lifetime will shrink drastically when you prepay.