Every loan in Nepal is repaid through EMIs — fixed monthly payments that cover both interest and principal. Yet most borrowers do not fully understand how their EMI is calculated or how to reduce the total interest they pay.

The EMI formula
EMI = P × r × (1 + r)^n / ((1 + r)^n − 1)

Where:

  • P = principal loan amount
  • r = monthly interest rate (annual rate ÷ 12 ÷ 100)
  • n = tenure in months

For example, a NPR 30 lakh home loan at 9.55% for 20 years gives a monthly EMI of approximately NPR 28,000.

How the loan balance changes over time
In the early years, most of your EMI goes towards interest. Only in the later years does the principal repayment accelerate. This is called the amortisation effect and it is why prepaying early has a much bigger impact than prepaying late.

Prepayment: the fastest way to save
If you pay an extra NPR 5,000 per month on the above loan:

  • You will pay off the loan 4 years earlier
  • You will save over NPR 10 lakhs in total interest

Use the LoanBazaar Advanced EMI Calculator to simulate your own prepayment scenarios with both Reduce Tenure and Reduce EMI strategies.

Key takeaway: The cheaper the interest rate and the shorter the tenure, the less you pay overall. Always compare total interest payable — not just the EMI amount.