How Loan EMI Is Calculated: Formula and Example
An EMI (Equated Monthly Instalment) is the fixed amount you pay each month on a home, car or personal loan. Each EMI contains some interest and some principal; early EMIs are mostly interest.
The EMI 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.
Example
A ₹5,00,000 loan at 10% a year for 5 years: r = 0.10 ÷ 12 = 0.008333, n = 60. EMI ≈ ₹10,624. Total paid ≈ ₹6,37,412, so total interest ≈ ₹1,37,412.
How to lower your EMI
- Choose a longer tenure (lower EMI, but more total interest).
- Make a bigger down payment.
- Prepay part of the principal when you can; most floating-rate loans allow this without penalty.
- Compare rates; 1% lower interest on a long loan saves a lot.
For general information only. See our disclaimer.
Last updated: 2026-11-07