How to Calculate Loan EMI (With Formula and Example)
Learn how monthly loan instalments are worked out, how interest rate and term change the total you pay, and how to compare offers.
What EMI means
An equated monthly instalment (EMI) is the fixed amount you pay each month on a loan. Early payments are mostly interest; later payments are mostly principal, but the total stays the same every month.
The formula
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1). P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of monthly payments.
Example: a loan of 1,000,000 at 12% a year for 5 years gives r = 0.01 and n = 60, so the EMI is about 22,244. Over five years you repay about 1,334,667 — roughly 334,667 in interest.
What changes the total most
A longer term lowers the monthly payment but raises the total interest, often by a lot. A small change in the interest rate also adds up over many years. Put two offers side by side in the loan EMI calculator and compare the “total interest” line, not just the monthly figure.
Before you sign
Ask about processing fees, insurance and early-repayment charges, since these are not part of the EMI formula. This guide is general information, not financial advice — check the final terms with your lender.