What Is EMI? How Loan EMI Is Calculated, With Examples
Updated 5 November 2026
EMI means equated monthly instalment: the same amount you pay every month until a loan is repaid. Each EMI has two parts, interest on the loan still left and a bit of the loan itself.
The EMI formula
EMI = P × r × (1 + r)n ÷ [(1 + r)n − 1]
P is the loan amount, r is the monthly interest rate (yearly rate ÷ 12 ÷ 100) and n is the number of months.
Example
A ₹10 lakh loan at 10% for 5 years has an EMI of about ₹21,247. Over 60 months you pay about ₹12.75 lakh, so the interest is about ₹2.75 lakh.
Why early EMIs are mostly interest
Interest is charged on the loan that is still left. In the first years the loan is large, so most of the EMI goes to interest. As the loan shrinks, more of each EMI repays the principal.
Ways to lower your EMI or total interest
- Make a bigger down payment so you borrow less.
- Compare rates; even 0.5% less saves a lot on long loans.
- Prepay part of the loan when you can. On floating-rate home loans, banks cannot charge a prepayment penalty to individual borrowers.
- Choose a shorter tenure if you can afford the EMI: it raises the EMI but cuts total interest sharply.
Try it
Open the EMI calculator and enter your own numbers. Words you don't know are explained in the money glossary.