Loans, investing & tax
How to Calculate EMI: Formula, Example and Shortcut
Updated 25 September 2026 · 5 min read
An EMI (equated monthly instalment) is the fixed amount you pay every month until a loan is repaid. Every EMI has two parts: interest on what you still owe, and a slice of the principal. Here's how banks calculate it — and how to check their numbers in seconds.
The EMI formula
EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
- P — the loan amount (principal)
- r — the monthly interest rate: annual rate ÷ 12 ÷ 100. For 10% a year, r = 0.008333
- n — the number of monthly instalments: years × 12
Worked example: ₹10 lakh at 10% for 5 years
- P = ₹10,00,000, r = 10 ÷ 12 ÷ 100 = 0.008333, n = 5 × 12 = 60
- (1 + r)ⁿ = 1.008333⁶⁰ ≈ 1.6453
- EMI = 10,00,000 × 0.008333 × 1.6453 ÷ (1.6453 − 1) ≈ ₹21,247
Over 60 months you pay about ₹12.75 lakh in total — roughly ₹2.75 lakh of it is interest.
Check your own EMI with the EMI calculatorCalculate monthly EMI, total interest and a year-wise schedule — with part-prepayments to see how much interest you save.How each EMI is split
Take a ₹50 lakh home loan at 8.5% for 20 years. The EMI is ₹43,391. In the first month, interest is charged on the full ₹50 lakh: 50,00,000 × 8.5% ÷ 12 = ₹35,417. Only the remaining ₹7,974 reduces your loan. By the last years the split flips — almost the whole EMI goes to principal. That's why prepaying early in the loan saves the most interest.
Three ways to lower your total cost
- Choose the shortest tenure you can afford. The EMI rises, but total interest falls sharply.
- Prepay when you can. Even one extra payment in the first few years cuts months off the loan. The EMI calculator shows the interest you save.
- Negotiate the rate. A 0.5% lower rate on a big home loan saves lakhs over 20 years.
Planning a home loan? See the full numbers for a ₹50 lakh loan or a ₹20 lakh loan over 20 years.
Frequently asked questions
What is the formula for EMI?
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 monthly instalments.
Why is most of my early EMI interest?
Interest is charged on the outstanding balance, which is highest at the start. As you repay principal, the interest part shrinks and more of each EMI goes towards the loan itself.
Does a lower EMI always mean a cheaper loan?
No. A longer tenure lowers the EMI but increases the total interest you pay. Compare the total interest, not just the monthly amount.