How to Calculate EMI — Complete Guide
EMI (Equated Monthly Instalment) is the fixed amount you pay every month to repay a loan. Understanding how EMI is calculated helps you compare loan offers and plan your finances better.
The EMI Formula
EMI = P × r × (1+r)ⁿ / ((1+r)ⁿ − 1)
Where:
- P = Principal loan amount
- r = Monthly interest rate (annual rate ÷ 12 ÷ 100)
- n = Total number of monthly payments (years × 12)
Worked Example — Home Loan
Loan: ₹50 lakhs | Rate: 8.5% per annum | Tenure: 20 years
- P = 5,000,000
- r = 8.5 / 12 / 100 = 0.007083
- n = 20 × 12 = 240
- EMI = 5,000,000 × 0.007083 × (1.007083)²⁴⁰ / ((1.007083)²⁴⁰ − 1)
- EMI ≈ ₹43,391 per month
- Total payment = ₹1,04,13,840
- Total interest = ₹54,13,840
💡 Important: Over 20 years, you pay ₹54 lakhs in interest on a ₹50 lakh loan — that's more than the principal itself! A shorter tenure or higher down payment saves significantly.
EMI for Common Loan Amounts at 8.5%
| Loan Amount | 10 years | 15 years | 20 years |
|---|---|---|---|
| ₹10 lakh | ₹12,399 | ₹9,847 | ₹8,678 |
| ₹25 lakh | ₹30,997 | ₹24,618 | ₹21,695 |
| ₹50 lakh | ₹61,993 | ₹49,237 | ₹43,391 |
| ₹1 crore | ₹1,23,986 | ₹98,474 | ₹86,782 |
Tips to Reduce Total Interest
- Pay a higher down payment — reduces the principal and thus total interest
- Choose shorter tenure — higher EMI but much less total interest
- Make prepayments — even occasional lump sum payments reduce principal fast
- Compare interest rates — even 0.5% difference saves lakhs over 20 years