How to Calculate EMI (With Formula and Examples)

Every home, car or personal loan comes with an EMI — a fixed monthly payment that combines both principal and interest. Understanding how it's calculated helps you see exactly what you're paying for, and why two loans with the same amount can have very different total costs.

The EMI formula

EMI = P × r × (1 + r)ⁿ / ((1 + r)ⁿ − 1), where P is the loan principal, r is the monthly interest rate (your annual rate divided by 12 and by 100), and n is the total number of monthly instalments.

This is a reducing-balance formula: each month, interest is charged only on the balance still outstanding, not on the original loan amount. As you pay down principal, less of each future EMI goes toward interest.

Why the same EMI amount can be misleading

Two loans with the same monthly EMI can have very different total costs if their tenures differ. A longer tenure lowers the EMI but increases the total interest paid, sometimes dramatically. Always compare total interest, not just the EMI, before choosing a tenure.

A worked example

• Loan amount: ₹20,00,000
• Interest rate: 8.5% per year
• Tenure: 20 years (240 months)
• Monthly EMI: ≈ ₹17,357
• Total interest paid: ≈ ₹21,65,680 — more than the principal itself

Notice that the total interest here is actually larger than the amount borrowed. That's the compounding effect of a long tenure, and it's exactly why comparing tenures matters as much as comparing interest rates.

What EMI calculators don't include

Most EMI calculators, including ours, compute principal and interest only. They don't include processing fees, loan insurance, or prepayment charges — check these separately with your lender, since they can meaningfully change the real cost of a loan.