How Your Loan EMI Is Calculated (and What Changes It)
Whether it’s a home, car, or personal loan, your monthly repayment is the EMI — the Equated Monthly Instalment. It’s a fixed amount that covers both the interest and a part of the principal each month. Understanding how it’s worked out helps you compare loans and avoid paying more than you need to.
What the EMI depends on
- Principal — the amount you borrow. A bigger loan means a bigger EMI.
- Interest rate — the annual rate charged, converted to a monthly rate.
- Tenure — how many months you take to repay. A longer tenure lowers the EMI but increases total interest.
The formula
EMI is calculated as P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the number of months. It looks intimidating, but it simply spreads the loan plus interest evenly across every month so each payment is identical.
Why a longer loan costs more
It’s tempting to pick the longest tenure because the monthly EMI is smaller and easier to afford. But stretching the loan means the interest compounds over more months, so you pay far more in total. For example, the same loan over 20 years can cost dramatically more in interest than over 10 years, even at the same rate. The right balance is an EMI you can comfortably afford without dragging the loan out unnecessarily.
EMI per ₹1 lakh — quick reference
This table shows the monthly EMI for every ₹1 lakh you borrow. To estimate your own, multiply by your loan amount in lakhs — a ₹25 lakh loan at 9% for 20 years is 25 × ₹900 ≈ ₹22,500 a month.
Monthly EMI per ₹1,00,000 borrowed (rounded).
| Interest rate | 5 years | 10 years | 15 years | 20 years |
|---|---|---|---|---|
| 8% | ₹2,028 | ₹1,213 | ₹956 | ₹836 |
| 9% | ₹2,076 | ₹1,267 | ₹1,014 | ₹900 |
| 10% | ₹2,125 | ₹1,322 | ₹1,075 | ₹965 |
| 11% | ₹2,174 | ₹1,378 | ₹1,137 | ₹1,032 |
| 12% | ₹2,224 | ₹1,435 | ₹1,200 | ₹1,101 |
Principal vs interest over time
In the early years of a loan, most of your EMI goes toward interest and only a little toward the principal. As the balance falls, more of each payment chips away at the principal. This is why prepaying early in the loan saves the most interest.
To see your EMI, total interest, and a year-by-year breakdown, enter your loan amount, rate, and tenure into our EMI Calculator.
Frequently asked questions
How is EMI calculated?
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan amount, r is the monthly interest rate (annual ÷ 12 ÷ 100), and n is the number of months. The formula spreads principal plus interest evenly across every month.
Does a longer tenure reduce my EMI?
Yes — a longer tenure spreads the loan over more months, so each EMI is smaller. But you end up paying significantly more total interest over the life of the loan.
Does prepaying a loan early save money?
Yes, a lot. In the early years most of your EMI goes toward interest, so prepaying then cuts the outstanding principal — and the future interest on it — the most.
Can I use the same formula for home, car, and personal loans?
Yes. The EMI formula is identical for any reducing-balance loan; only the amount, rate, and tenure change.
Try it yourself
Open the EMI Calculator →About the author
The Tiny Web Tools Team
The Tiny Web Tools team builds and maintains the free calculators and converters on this site. We write these guides to explain the formulas behind our tools in plain English, and we review them when rules, rates, or official specifications change.
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