This is the most common and widely used EMI type by banks. Interest is calculated on the remaining loan balance. As EMI progresses, interest reduces and principal increases.
Best for: Home Loan, Personal Loan, Car Loan
In flat EMI, interest is calculated on the full loan amount for the entire tenure. EMI remains fixed but total interest paid is higher compared to reducing balance EMI.
Used by: Some NBFCs and short-term loans
Borrower pays only interest during the initial period. Principal is paid later in lump sum or regular EMIs.
Best for: Business cash flow management
EMI increases gradually over time. Useful for salaried individuals expecting income growth.
Higher EMI in early years and lower EMI later. Ideal for people with high current income.
Which EMI type is best?
Reducing balance EMI is best because it saves interest.
Is EMI same for all banks?
Formula is same, but interest rate differs.
Does EMI change if interest rate changes?
Yes, floating rate loans may change EMI.