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Loan EMI uses the reducing balance formula: EMI = P × r × (1+r)^n / [(1+r)^n - 1]. Here P is principal amount, r is monthly interest rate (annual/12/100), n is total months. Interest is calculated on outstanding balance, so each month as you repay, interest decreases and principal portion increases, keeping EMI constant throughout the loan term.

Shorter tenure means higher EMI but significantly less total interest. For $50,000 at 10%: 3-year has $1,613 EMI and $8,065 interest; 5-year has $1,062 EMI but $13,740 interest; 7-year has $830 EMI but $19,670 interest. Choose shortest tenure where EMI stays comfortable for your budget to minimize total cost of borrowing.

Key factors include: credit score (higher is better), income stability and amount, existing debt obligations, loan amount and tenure, collateral (secured loans get lower rates), relationship with lender, and market conditions. Improving credit score before applying can save significant money. Compare rates from multiple lenders before deciding.

Most loans allow prepayment but some charge 1-4% penalty on the prepaid amount. Check your loan agreement for prepayment terms. Even partial prepayments significantly reduce total interest. Early prepayment saves more interest than later prepayment due to how interest is calculated on reducing balance. Calculate if interest savings exceed any prepayment penalty.