EMI Formula Explained

EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan amount, r the monthly interest rate (annual rate ÷ 12 ÷ 100) and n the number of monthly instalments.

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Formula

P = loan amount, r = monthly rate, n = months. The same EMI is paid every month, but early payments are mostly interest and later ones mostly principal.

Example

A 10,00,000 loan at 9% a year for 5 years: r = 0.0075, n = 60, giving an EMI of about 20,758 and total interest of roughly 2,45,500.

What changes your EMI

A higher rate or loan amount raises it. A longer tenure lowers the EMI but increases total interest.

Tips

Prepaying early cuts the most interest. Check the lender’s fees and whether the rate is fixed or floating. Figures here are estimates.

Frequently asked questions

Yes for a fixed-rate loan; the split between interest and principal changes.

It lowers the EMI but raises total interest.

A table showing interest and principal for each instalment.

General information, not tax, legal or accounting advice. Rules and rates change; confirm with a qualified professional. Only document real transactions.