EMI (Equated Monthly Installment) is the fixed payment amount made by a borrower to a lender at a specified date each calendar month. It's calculated using the formula: EMI = [P x R x (1+R)^N]/[(1+R)^N-1], where P is the principal loan amount, R is the monthly interest rate, and N is the number of monthly installments.

Three main factors affect your EMI: 1) Principal loan amount (higher amount = higher EMI), 2) Interest rate (higher rate = higher EMI), and 3) Loan tenure (longer tenure = lower EMI but more total interest). Processing fees and other charges also affect the total loan cost.

In reducing balance method, interest is calculated on the outstanding principal each month, so interest decreases over time. In flat rate method, interest is calculated on the original principal for the entire tenure. Reducing balance is more common and generally better for borrowers as it results in lower total interest.

You can reduce EMI by: 1) Opting for a longer tenure (though this increases total interest), 2) Making a larger down payment to reduce principal, 3) Negotiating a lower interest rate, or 4) Looking for loans with lower processing fees and other charges.

Prepayment is paying part or all of your loan before the scheduled tenure. It reduces your principal, which can either reduce your EMI or shorten your loan tenure. Some lenders charge prepayment penalties, so check your loan terms before making extra payments.