What is an EMI, and how is it calculated?
The simple maths behind your monthly loan payment, and why a small change in rate or tenure moves it so much.
EMI in one line
EMI stands for equated monthly instalment. It is the fixed amount you pay your lender every month until the loan is cleared. Each EMI has two parts: some repays the principal you borrowed, and the rest is interest.
In the early months most of your EMI goes towards interest. As the balance falls, more of it goes towards principal.
The formula
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of months.
You don't need to do this by hand. Our EMI calculator does it for you as you move the sliders.
What moves your EMI the most
A longer tenure lowers your monthly EMI but increases the total interest you pay. A shorter tenure does the opposite. The interest rate matters a lot too: on the same amount and tenure, a few percentage points can change your total cost by a large amount.
That is why it is worth comparing your current rate with what you might be eligible for before you decide anything.
This article is general information, not financial advice. Approval, rates and terms are decided by the lender.