EMI stands for equated monthly installment, the fixed amount you pay every month to repay a loan with interest.
The EMI formula
EMI = P x r x (1 + r)^n / ((1 + r)^n – 1). P is the loan amount, r is the monthly interest rate (annual rate / 12 / 100) and n is the number of monthly payments.
Example
A loan of 500,000 at 12% a year for 5 years. Here r = 0.01 and n = 60. The EMI comes to about 11,122 per month. Over 60 months you pay about 667,333 in total, which means roughly 167,333 is interest.
How tenure and rate affect your EMI
- A longer tenure lowers the monthly payment but increases total interest.
- A higher interest rate raises both the EMI and total interest.
- A bigger down payment reduces the loan amount and everything that follows.
Tips
- Compare offers by total cost, not just the monthly payment.
- Check for processing fees and early repayment charges.
Use our EMI calculator to compare different amounts, rates and tenures.
Try it now: EMI Calculator