How to Calculate EMI (Equated Monthly Installment)
EMI (Equated Monthly Installment) is the fixed monthly payment you make to repay a loan. It includes both principal and interest components.
EMI Formula
EMI = P × r × (1+r)^n / [(1+r)^n - 1]
Where:
- EMI = Monthly installment amount
- P = Loan principal amount
- r = Monthly interest rate (annual rate / 12 / 100)
- n = Loan tenure in months
Step-by-Step:
- 1
Get loan details
Note down principal (P), annual interest rate, and tenure in years.
- 2
Convert rate to monthly
Divide annual rate by 12 and by 100.
- 3
Convert tenure to months
Multiply years by 12.
- 4
Apply the EMI formula
Calculate using the formula above.
Worked Examples:
Home loan EMI
Principal: ₹50,00,000Rate: 8.5%Tenure: 20 years
Result: ₹43,391/month
r = 0.085/12 = 0.00708. n = 240. EMI = 5000000 × 0.00708 × (1.00708)^240 / [(1.00708)^240 - 1]