How EMI is Calculated

EMI (Equated Monthly Installment) is the fixed amount you pay every month to repay a loan. It consists of both principal and interest components and remains constant throughout the loan tenure.

EMI Calculation Formula

The EMI is calculated using the following standard formula:

EMI = [ P × R × (1 + R)^N ] / [ (1 + R)^N − 1 ]

Where:

P = Loan Amount (Principal)
R = Monthly Interest Rate (Annual Rate ÷ 12 ÷ 100)
N = Loan Tenure in Months

Step-by-Step EMI Calculation

Let’s understand EMI calculation with a simple example:

Loan Amount (P): ₹5,00,000
Annual Interest Rate: 9%
Loan Tenure: 10 years (120 months)

Monthly Interest Rate (R) = 9 ÷ 12 ÷ 100 = 0.0075

Applying the values in the EMI formula:

EMI ≈ ₹6,334 per month

Over the loan tenure, you will repay a total amount of approximately ₹7,60,000, out of which around ₹2,60,000 is interest.

What Affects Your EMI?

Loan Amount: Higher loan amount increases EMI
Interest Rate: Higher interest rate increases EMI
Loan Tenure: Longer tenure reduces EMI but increases total interest

Why Use an EMI Calculator?

Calculating EMI manually is complex. An online EMI calculator instantly gives accurate results and helps you compare loan options easily.

Try Loan EMI Calculator

Frequently Asked Questions

Is EMI the same every month?
Yes, EMI remains fixed, but the principal and interest components change every month.

Can EMI change during the loan tenure?
EMI may change if the interest rate is floating or if you prepay the loan.

Does EMI include taxes?
No, EMI includes only principal and interest. Taxes and processing fees are separate.

EMI Calculation Formula and Example