An EMI (equated monthly instalment) is the fixed amount you pay every month on a loan. Part of each payment goes towards interest and the rest reduces the amount you owe. Early in the loan most of the EMI is interest; towards the end most of it is principal.
The formula
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1)
- P is the loan amount
- r is the monthly interest rate, the yearly rate divided by 12 and by 100
- n is the number of monthly payments
Example
A loan of ₹5,00,000 at 10% a year for 5 years gives r = 10 ÷ 12 ÷ 100 ≈ 0.00833 and n = 60. Putting these into the formula gives an EMI of about ₹10,624. Over 60 months you pay about ₹6,37,400 in total, so the interest is roughly ₹1,37,400.
What changes your EMI
- A longer tenure lowers the monthly EMI but increases the total interest you pay.
- A small rate difference matters a lot on big, long loans such as home loans. Compare offers on total cost, not only the EMI.
- Prepaying part of the loan reduces the principal, which cuts future interest. Check whether your lender charges for prepayment.
Use the Loan EMI Calculator to try different amounts, rates and tenures before you sign. Treat the result as an estimate, your lender's sanction letter, including fees and insurance, is the final figure.