How to Calculate Loan EMI — Formula & Examples
The exact formula banks use, explained simply, with step-by-step worked examples for home, car and personal loans — plus a free calculator that does it in any currency. No signup.
The EMI formula
Every bank in the world uses the same reducing-balance formula:
EMI = P × r × (1+r)n ÷ ((1+r)n − 1)
- P = principal (the loan amount)
- r = monthly interest rate = annual rate ÷ 12 ÷ 100
- n = number of monthly installments = years × 12
The result is your fixed monthly payment. Multiply it by n to get the total repaid; subtract P to get the total interest.
Worked example — home loan
Loan of 1,000,000 at 10% for 20 years:
- r = 10 ÷ 12 ÷ 100 = 0.008333
- n = 20 × 12 = 240
- (1+r)n = 1.008333240 ≈ 7.328
- EMI = 1,000,000 × 0.008333 × 7.328 ÷ (7.328 − 1) ≈ 9,650 per month
- Total repaid ≈ 2,316,000 · total interest ≈ 1,316,000
Worked example — car loan
Borrow 800,000 at 9% for 5 years: r = 0.0075, n = 60 → EMI ≈ 16,607 per month, total interest ≈ 196,400. Shorter tenures sharply cut total interest on car loans because the asset depreciates while you pay.
Why the "total interest" matters more than the monthly figure
People anchor on the monthly EMI, but the number that decides affordability is the total interest. On a 20-year loan at 9%, you typically repay about 2.1× what you borrowed. Seeing that total upfront is why many borrowers shorten the tenure or increase the down payment. Use the calculator's prepayment slider to see exactly how much a little extra each month saves.
Frequently Asked Questions
What is the EMI formula?
EMI = P × r × (1+r)ⁿ ÷ ((1+r)ⁿ − 1). P is principal, r the monthly rate, n the months.
Is EMI the same as monthly payment?
Yes — "EMI" (South Asia) and "monthly payment/repayment" (US/UK) are mathematically identical.
How does prepayment help?
It cuts the outstanding principal, so future interest drops — most powerful early in the tenure.
Related: India home loan · US mortgage · UK mortgage · UAE car loan