Loans
How EMI works
Reducing-balance EMI, interest vs principal split, and why tenure changes total cost.
5 min read · Updated August 2026
Reducing balance in plain words
Each EMI pays interest on the outstanding principal, then reduces principal. Early EMIs are interest-heavy; later EMIs repay more principal.
EMI vs total interest
Cutting tenure usually raises EMI but can slash total interest. Lengthening tenure does the opposite. Affordability and total cost both matter.
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Educational content from Aaru Wealth. Not investment, tax or legal advice.