How is EMI calculated?
EMI (Equated Monthly Installment) is calculated using the formula: EMI = P x r x (1+r)^n / ((1+r)^n - 1), where P is principal, r is monthly interest rate, and n is number of months.
What is a reducing balance interest?
In reducing balance interest, the interest is calculated on the outstanding principal each month, not the original amount. This makes it cheaper than flat/fixed interest rates.
Does a lower EMI mean a better loan?
Not necessarily. A longer tenure means lower EMI but higher total interest paid. Always compare total interest cost, not just EMI.