What is an EMI?
An EMI (Equated Monthly Instalment) is the fixed amount you pay your lender every month until a loan is fully repaid. Each EMI has two parts: interest on the balance you still owe, and principal, which reduces that balance. In the early months most of your EMI goes towards interest; towards the end, most of it pays off principal.
How to use this EMI calculator
- Loan amount – the total amount you are borrowing.
- Interest rate – the yearly rate quoted by your bank or lender.
- Tenure – how long you will take to repay, in years or months.
Your monthly EMI, total interest and total payment update as you type. Open the amortization schedule to see how much principal and interest you pay each year and how your balance falls.
EMI formula
The calculator uses the standard reducing-balance formula used by banks worldwide:
EMI = P × r × (1 + r)n ÷ [(1 + r)n − 1]
- P = loan amount (principal)
- r = monthly interest rate (annual rate ÷ 12 ÷ 100)
- n = number of monthly instalments
Example
Borrow 250,000 at 9.5% a year for 5 years (60 months). The monthly rate is 9.5 ÷ 12 ÷ 100 = 0.00792. Putting these into the formula gives an EMI of about 5,250 per month. Over five years you would pay roughly 65,000 in interest, for a total repayment of about 315,000.
How to lower your EMI
- Choose a longer tenure – your EMI falls, but you pay more interest overall.
- Negotiate a lower rate – even 0.5% less can save a large amount on big loans.
- Make a bigger down payment – borrowing less is the simplest way to cut both EMI and interest.
- Prepay when you can – extra payments go straight to principal and shorten your loan.
Flat rate vs reducing balance
Some lenders quote a flat interest rate, where interest is charged on the original loan amount for the whole term. This calculator uses the reducing balance method, where interest is charged only on what you still owe. A flat rate of 10% costs far more than a reducing rate of 10%, so always ask which method your lender uses.