EMI Calculator

An EMI (Equated Monthly Installment) is the fixed monthly payment you make to repay a loan. For a standard fixed-rate, reducing-balance loan, every scheduled installment is generally the same amount for the entire tenure, even though the underlying mix of principal and interest inside each EMI changes month to month. This is the standard repayment structure for home loans, personal loans, car loans, and most other term loans in many countries, including India, where the term "EMI" itself is most widely used.

Formula used: EMI = P × r × (1+r)ⁿ ÷ ((1+r)ⁿ − 1), where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the tenure in months. This formula is commonly used for fixed-payment, reducing-balance loans by banks and lenders in many countries.

Worked example: a loan of 1,000,000 (in any currency — for example, ₹10,00,000 for a borrower in India) at 9% p.a. for 5 years (60 months) gives a monthly rate of 0.75%. Applying the formula: EMI = 1,000,000 × 0.0075 × (1.0075)^60 ÷ ((1.0075)^60 − 1) ≈ 20,758. Over 60 months that's a total payment of roughly 1,245,501, of which about 245,501 is interest.

Why the interest-to-principal ratio shifts over time: each month's interest is calculated on the outstanding (reducing) principal balance, which is highest at the start of the loan. So in month 1, a large share of the EMI goes toward interest and only a small share reduces principal; by the final months, almost the entire EMI reduces principal since the outstanding balance — and therefore the interest charged on it — has shrunk considerably. The EMI amount itself never changes; only the split within it does.

1. Choosing the longest tenure just to minimize EMI. A lower EMI feels affordable, but as the table above shows, a much longer tenure can more than double your total interest cost — balance affordability against total cost, not just the monthly figure.

2. Ignoring processing fees and other charges. The EMI formula covers principal and interest only — processing fees, insurance add-ons, and other charges increase your effective cost of borrowing beyond what the EMI figure alone suggests.

3. Not checking for prepayment penalties. Some loans, especially fixed-rate ones, charge a penalty for prepayment or foreclosure — check your loan terms before assuming a prepayment strategy will work penalty-free.

4. Comparing loans by EMI alone instead of total cost. Two loans with the same EMI can have different total interest costs if their tenures or rates differ — always compare total payment (EMI × months) alongside the EMI itself.

5. Not accounting for EMI as a percentage of income. Lenders may assess your repayment capacity using income-based measures such as FOIR (Fixed Obligation to Income Ratio) in India, or a comparable debt-to-income (DTI) ratio elsewhere — the acceptable threshold varies by lender, borrower profile, and loan type. Even if you qualify for a loan on paper, keeping EMIs comfortably below your lender's threshold protects against income disruptions.