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An EMI (equated monthly instalment) bundles the amount you borrowed and the interest into one fixed payment each month. In the early months more of each EMI goes towards interest, and over time more goes towards the principal. A longer tenure lowers the EMI but increases the total interest you pay. Try our EMI estimator and repayment schedule to see how the amount, tenure and rate change the numbers.

With the reducing-balance method, interest is charged only on the amount you still owe, so it falls as you repay. With the flat method, interest is charged on the original amount for the whole tenure, so the real cost is usually noticeably higher than the quoted rate suggests. When you compare loans, ask for the total amount you will repay, not just the rate.

Set your due date soon after payday, use auto-debit or a phone reminder a few days before, and keep one month of EMI aside as a buffer if you can. If you expect trouble, talk to your lender early. Late payments can mean extra charges and can hurt your credit record.

A common starting point is to split your take-home income into 50% for needs (rent, food, bills and EMIs), 30% for wants and 20% for savings and extra repayments. It is only a guide, so adjust it to your situation, but write your numbers down each month so nothing surprises you.

A common rule of thumb is to keep all your EMIs within about 40 to 50% of your monthly income, and lower if your income varies from month to month. Use our eligibility checker for an illustrative figure, then aim to borrow comfortably below it rather than at the limit.

What is the total amount I will repay? Are there processing or other fees? What happens if I pay late? Can I prepay or close the loan early, and at what cost? Is the interest flat or reducing? Ask for the answers in writing before you sign anything.