How to Calculate Loan EMI: Reducing Balance Formula & Amortization

Published: 2026-02-02 | Read Time: 4 min read

Understand the mathematical reducing balance formula behind Home, Car, and Personal Loan EMIs, and how prepayments drastically reduce interest.

Frequently Asked Questions

What is the difference between Flat Rate and Reducing Balance EMI?

Flat rate calculates interest on the entire original principal for the full tenure. Reducing balance calculates interest only on the remaining outstanding balance, costing significantly less.