How is EMI calculated?
EMI (Equated Monthly Instalment) is the fixed amount you pay your lender every month until the loan is repaid. It is calculated with this formula:
EMI = P × r × (1 + r)n / ((1 + r)n − 1)
- P – principal loan amount
- r – monthly interest rate (annual rate ÷ 12 ÷ 100)
- n – number of monthly instalments
For example, a ₹25,00,000 home loan at 8.5% for 20 years gives an EMI of about ₹21,696, with roughly ₹27 lakh paid as interest over the loan's life.
How to reduce your EMI
- Choose a longer tenure (lower EMI, but more total interest).
- Make a larger down payment to reduce the principal.
- Compare lenders and negotiate a lower interest rate.
- Make part-prepayments early in the loan, when interest is highest.
FAQ
Is this EMI calculator accurate? Yes — it uses the standard reducing-balance formula used by banks. Your actual EMI may differ slightly due to processing fees or rounding.
Does it work for car and personal loans? Yes, the formula is the same for any loan with fixed monthly instalments.