EMI (Equated Monthly Installment) is the fixed monthly payment made to a lender to repay a loan. Each EMI comprises a principal component and an interest component, with the interest share decreasing over the loan tenure.

What is the EMI formula?

EMI = P times r times (1+r)^n divided by ((1+r)^n - 1), where P is the principal, r is the monthly interest rate (annual rate divided by 12 divided by 100), and n is the number of monthly installments.

Does a longer tenure reduce EMI?

Yes. A longer tenure reduces the monthly EMI but increases the total interest paid over the loan life. A shorter tenure has higher EMIs but lower total interest cost.

What is an amortization schedule?

An amortization schedule shows the breakdown of each monthly payment into principal and interest portions. Early payments are mostly interest; later payments are mostly principal.

Loan EMI Calculator — Monthly Payment

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How loan EMI works

When you take a loan at a fixed interest rate, the lender calculates a constant monthly payment that amortizes the loan over the agreed tenure. The EMI is the same every month, but the proportion of interest vs principal changes. Early in the loan, most of the EMI goes toward interest. As the principal reduces, the interest component shrinks.

This front-loading of interest is why prepaying a loan early saves significant money. Making extra principal payments in the first third of the loan tenure reduces the outstanding balance on which future interest is calculated, potentially cutting months off the tenure.

Comparing loan offers

Use the EMI calculator to compare offers from different lenders. Enter the same principal and tenure with each interest rate to see the EMI and total interest cost difference. A 0.5% difference in rate on a 20-year home loan can mean significant total interest savings.

Also compare processing fees, prepayment penalties, and foreclosure charges. A loan with a slightly higher rate but no prepayment penalty may be cheaper if you plan to pay it off early.

Frequently asked questions

What is EMI?: EMI (Equated Monthly Installment) is the fixed monthly payment made to a lender to repay a loan. Each EMI comprises a principal component and an interest component, with the interest share decreasing over the loan tenure.
What is the EMI formula?: EMI = P times r times (1+r)^n divided by ((1+r)^n - 1), where P is the principal, r is the monthly interest rate (annual rate divided by 12 divided by 100), and n is the number of monthly installments.
Does a longer tenure reduce EMI?: Yes. A longer tenure reduces the monthly EMI but increases the total interest paid over the loan life. A shorter tenure has higher EMIs but lower total interest cost.
What is an amortization schedule?: An amortization schedule shows the breakdown of each monthly payment into principal and interest portions. Early payments are mostly interest; later payments are mostly principal.