What is an EMI?
An EMI, or equated monthly instalment, is the fixed amount you pay every month to repay a loan with interest. The term is used widely in India, Pakistan and the Gulf for home, car, personal and education loans, but the maths is the same as any standard repayment loan elsewhere. Each instalment covers the interest due for that month, and the rest reduces the amount you still owe. Early in the loan, interest takes most of the payment; towards the end, almost all of it goes to the principal.
The EMI formula
The calculator uses the standard reducing-balance formula: EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1), where P is the loan amount, r is the monthly interest rate (the annual rate divided by 12 and by 100) and n is the number of monthly instalments. For example, a loan of 2,500,000 at 9.5% a year for 15 years gives r = 0.0079167 and n = 180, and an EMI of about 26,106. Over the full term you would pay about 4.70 million, of which roughly 2.20 million is interest. If the interest rate is zero, the EMI is simply the amount divided by the number of months.
Reading the schedule
The bar shows how the total you repay splits between principal and interest. The table then works through the loan year by year, showing how much principal and interest you pay in each year and the balance left at the end of it. It is a useful way to see how slowly the balance falls at first, and why prepayments early in a loan save the most interest.
Ways to lower your total interest
- Shorter tenure: a higher EMI but much less interest overall.
- Part-prepayment: paying a lump sum early reduces the principal on which every later month's interest is charged. Check your lender's prepayment charges.
- A lower rate: even half a percentage point matters on a long loan, so compare offers and consider refinancing.
Limits of the estimate
Real loans can include processing fees, insurance, floating rates that change over time and different rounding rules. Your lender's sanction letter is the authority on your actual EMI. Use this calculator to compare scenarios and plan your budget; for a different payment frequency, try the loan calculator.