What this calculates
This works out the fixed monthly instalment on an amortising loan — a home loan, car loan or personal loan — from the amount borrowed, the annual interest rate and the term. It also shows what that loan costs you in total, and how the balance falls year by year.
The number most people miss is the total interest. The instalment tells you whether you can afford the loan this month; the interest tells you what the loan is actually worth paying.
The formula
Every amortising loan uses the same expression. P is the principal, r the
monthly interest rate as a decimal, and n the number of monthly instalments.
Monthly instalment
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)Monthly rate from an annual rate
r = annual rate ÷ 12 ÷ 100Total cost of the loan
Total payable = EMI × n · Interest = total payable − PAt a rate of exactly zero the formula collapses to nought over nought, so a 0% loan is simply the principal split evenly across the term.
Worked example
Now change one thing. Keep the amount and the rate, and shorten the term to 15 years: the instalment rises to about 24,618, but the total interest falls to roughly 19.31 lakh. Paying about 2,900 more a month saves nearly 7.8 lakh over the life of the loan.
When to use it, and the mistakes to avoid
Use this before you accept a loan offer, when comparing two lenders, when deciding between a shorter and longer tenure, and before making a prepayment.
The traps that cost real money:
- Judging a loan by the instalment. The lowest monthly payment is usually the most expensive loan. Compare total interest, not EMI.
- Ignoring the fees. Processing charges, documentation fees and mandatory insurance are not in this formula. Ask for the APR to compare offers honestly.
- Assuming a floating rate holds. When rates rise, most lenders extend the tenure rather than raise the instalment. The payment looks unchanged while the loan quietly gets more expensive.
- Prepaying late. A prepayment in year two removes far more interest than the same amount in year twelve, because it attacks a much larger balance.
- Forgetting the deposit. The loan amount is the price minus your down payment, not the price of the house.
FAQ
What does EMI actually stand for?
Equated Monthly Instalment. The word that matters is 'equated': every payment is the same size, even though its make-up changes completely over the life of the loan. Early instalments are mostly interest; later ones are mostly principal.
Why does a longer tenure cost me more when the instalment is smaller?
Interest is charged on the balance still outstanding, so the longer that balance stays high, the more interest accrues. Stretching a 25 lakh loan at 8.5% from 15 years to 30 nearly halves the instalment but roughly doubles the total interest. A lower monthly payment is not a cheaper loan.
Is the rate my bank quotes the same as the rate in this formula?
This calculator uses the nominal annual rate divided by twelve, which is how lenders compute a monthly instalment. It is not the same as APR, which also folds in processing fees and insurance. Compare offers on APR, but expect your actual instalment to follow the nominal rate.
How much do I save by making a prepayment?
Every rupee of prepayment goes straight against the outstanding balance, so it removes all the future interest that balance would have generated. Prepaying early is worth far more than prepaying late, because the balance is highest at the start. Re-run this calculator with the reduced amount to see the effect.
Does the EMI change if interest rates move?
On a floating-rate loan, yes — though most lenders hold the instalment steady and lengthen the tenure instead, which quietly increases the total interest. On a fixed-rate loan the instalment is locked for the agreed period. Check which you have before assuming your payment is safe.
Why does my bank's number differ from this by a few rupees?
Rounding, mostly. Lenders round the instalment to whole units and settle the difference in the final payment, and some count days rather than whole months for the first instalment. A gap of a few rupees is normal; a gap of hundreds means a fee is bundled into the loan.