How Loan EMI Is Calculated (Formula + Worked Example)

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EMI (Equated Monthly Instalment) is the fixed amount you pay each month to repay a loan — part principal, part interest. The same formula powers home, car and personal loan calculators.

The EMI formula

EMI = P · r · (1 + r)^n / ((1 + r)^n − 1)

P = principal (loan amount)
r = monthly interest rate = annual rate ÷ 12 ÷ 100
n = number of monthly instalments = years × 12

Worked example

Borrow 200,000 at 7.5% per year for 20 years:

r = 7.5 ÷ 12 ÷ 100 = 0.00625
n = 20 × 12 = 240
EMI ≈ 1,611.19 per month
Total paid ≈ 386,685 → total interest ≈ 186,685

Notice that over a long tenure you can pay almost as much in interest as the original loan.

What each input does

Higher rate → higher EMI and much higher total interest. Longer tenure → lower EMI but far more total interest (you're borrowing for longer). Bigger down payment → smaller principal, so both EMI and interest drop. The best way to feel this is to change one number at a time and watch the totals.

Try it with your own numbers

The calculator below applies exactly this formula, instantly and privately in your browser.

Open the Loan EMI Calculator →

Frequently asked questions

What is EMI in simple terms?

EMI is the fixed monthly payment that repays a loan over its tenure. Early payments are mostly interest; later payments are mostly principal.

Does a longer tenure reduce the cost of a loan?

No. A longer tenure lowers the monthly EMI but increases the total interest you pay, because you're borrowing the money for more months.

Is this EMI calculator accurate for my bank?

It uses the standard reducing-balance EMI formula, which most lenders use. Small differences can come from processing fees, insurance or a different compounding convention.