How to Calculate EMI on a Loan
EMI — Equated Monthly Instalment — is the fixed amount you pay your bank every month until your loan is finished. It is worked out with one standard formula, and once you know it, you can check any bank's EMI yourself in a minute. This guide shows the formula, works it out step by step with a real example, and ends with the tips that actually lower your EMI.
How to calculate EMI on a loan — step by step
Write down your three numbers
You need three numbers: the loan amount (P), the annual interest rate, and the loan tenure in months (n). For the example in this guide: P = 1,000,000, annual rate = 12%, tenure = 5 years = 60 months.
Turn the annual rate into a monthly rate
Divide the annual rate by 12. For 12% a year, the monthly rate r = 12% / 12 = 1% per month, or 0.01. This is the rate the formula uses — never put the annual rate straight into the formula.
Use the EMI formula
EMI = P x r x (1+r)^n / ((1+r)^n - 1). With P = 1,000,000, r = 0.01 and n = 60: (1.01)^60 = 1.8166967, so EMI = 1,000,000 x 0.01 x 1.8166967 / 0.8166967 = 22,244.45 per month.
Work out the total payment and total interest
Total payment = EMI x number of months = 22,244.45 x 60 = 1,334,666.86. Total interest = total payment - loan amount = 1,334,666.86 - 1,000,000 = 334,666.86. That is the true cost of borrowing for this loan.
Check the first month of the table
The first month's interest is the loan amount times the monthly rate: 1,000,000 x 0.01 = 10,000. So 12,244.45 of the first EMI pays off the principal (22,244.45 - 10,000), and the balance left is 987,755.55. Each month the interest part falls and the principal part rises.
Compare before you borrow
Run the same calculation for every offer — a lower rate, a different tenure, a bigger down payment — and compare the total interest, not just the EMI. The loan with the lowest total interest is the cheapest loan, even if its EMI looks higher.
EMI examples — the same 1,000,000 loan at different rates and tenures
| Loan | How to work it out | Result |
|---|---|---|
| 12% a year, 5 years (60 months) | EMI = 1,000,000 x 0.01 x (1.01)^60 / ((1.01)^60 - 1) | EMI 22,244.45 — total 1,334,666.86 — interest 334,666.86 |
| 10% a year, 5 years (60 months) | monthly rate 0.8333% — EMI = 21,247.04 | EMI 21,247.04 — total 1,274,822.68 — interest 274,822.68 |
| 12% a year, 3 years (36 months) | monthly rate 1% — EMI = 33,214.31 | EMI 33,214.31 — total 1,195,715.15 — interest 195,715.15 |
| 12% a year, 10 years (120 months) | monthly rate 1% — EMI = 14,347.09 | EMI 14,347.09 — total 1,721,651.38 — interest 721,651.38 |
| First month of the 12% / 5-year loan | interest = 1,000,000 x 0.01 = 10,000 | principal 12,244.45 — balance left 987,755.55 |
| Last month of the 12% / 5-year loan | interest on the final small balance | almost the whole EMI is principal — balance 0 |
The EMI is calculated from the inputs only — a real bank EMI can differ because of processing fees, insurance, taxes or a rate that changes during the loan. Always check the final EMI with your bank before borrowing.
Five tips to lower your EMI
- Compare the total interest, not just the EMI: A longer loan always looks cheaper per month, but it costs far more in total interest — 10 years at 12% costs 721,651.38 in interest, more than double the 5-year loan. Judge a loan by its total interest.
- A lower rate beats a longer loan: Dropping the rate from 12% to 10% on the same 5-year loan saves 59,844.18 in interest. Even half a percent matters — always negotiate the rate first.
- Pay a bigger down payment: Borrowing less cuts both your EMI and your total interest at once. Every extra amount you pay upfront is an amount you never pay interest on.
- Pick the shortest loan you can afford: The shortest tenure whose EMI fits your monthly budget is usually the best deal — you pay less interest overall and finish sooner. Test your budget with the calculator first.
- Watch the fees, not just the rate: Processing fees, insurance and other charges add to the real cost of a loan. Ask the bank for the full cost, and compare that — not just the advertised rate.
Frequently asked questions
What is the EMI formula?
EMI = P x r x (1+r)^n / ((1+r)^n - 1), where P is the loan amount, r is the monthly interest rate (annual rate divided by 12) and n is the number of monthly payments. For a 1,000,000 loan at 12% a year for 5 years, the EMI is 22,244.45 per month.
What is an amortisation table?
It is the month-by-month plan of your loan: each row shows the EMI, how much of it is interest, how much pays off the principal, and the balance left. The interest part is biggest in the first month and shrinks as the balance falls, until the last month leaves a balance of zero.
How do I lower my EMI?
Borrow less, get a lower interest rate, or take a longer loan. A lower rate is the best option — it cuts both the EMI and the total interest. A longer loan cuts the EMI but raises the total interest, so it costs more in the end.
Is a longer loan better because the EMI is lower?
Only if you cannot afford the shorter loan's EMI. A longer loan is easier each month but costs far more interest in total — for example, 10 years at 12% on 1,000,000 costs 721,651.38 in interest, against 334,666.86 for 5 years.
Does this site store my loan figures?
No. Every calculation happens in your browser and your loan figures are never sent to any server or stored anywhere.