EMI Calculator
EMI Calculator
Work out the monthly instalment on a home, car, personal or education loan from the amount, interest rate and tenure — and see how much of what you repay is interest.
Loan EMI
A loan of $10,00,000 at 9% a year for 20 years
The EMI formula
- P
- the loan amount
- r
- the monthly interest rate: annual rate ÷ 12 ÷ 100
- n
- the number of monthly instalments: years × 12. Total repaid in today’s money = EMI × [1 − (1 + j)−n] ÷ j, where j = (1 + inflation)1/12 − 1 is inflation as a monthly rate.
Worked example
A loan of $10,00,000 at 9% a year for 20 years
r = 9 ÷ 12 ÷ 100 = 0.0075; n = 20 × 12 = 240
(1.0075)240 = 6.0092
EMI = 10,00,000 × 0.0075 × 6.0092 ÷ 5.0092 = $8,997
Total repaid = 8,997 × 240 = $21,59,342; interest = $11,59,342
The same loan at different tenures
| Tenure | EMI | Total interest | Interest ÷ loan |
|---|---|---|---|
| 5 years | $20,758 | $2,45,501 | 25% |
| 10 years | $12,668 | $5,20,109 | 52% |
| 15 years | $10,143 | $8,25,680 | 83% |
| 20 years | $8,997 | $11,59,342 | 116% |
| 25 years | $8,392 | $15,17,589 | 152% |
| 30 years | $8,046 | $18,96,641 | 190% |
What an EMI is made of
An equated monthly instalment is the same amount every month, but what it pays for is not. Early in a loan most of each instalment is interest, because interest is charged on the balance still owed and the balance is at its largest. As the balance falls the interest part shrinks and the principal part grows, so the last instalments are almost all principal. That is why paying extra early saves far more than paying extra late — the loan payoff calculator shows by how much.
The formula assumes a reducing-balance rate, which is how home loans and most bank loans are quoted. Some car, two-wheeler and consumer loans are quoted as a flat rate, charged on the original amount for the whole term; a flat rate looks much lower than the equivalent reducing rate and should not be entered here as if it were one.
Tenure is the lever with the biggest effect on total cost. Stretching a loan lowers the monthly figure, which is what makes a longer tenure tempting, but the table above shows what it costs. Processing fees, insurance bundled into the loan and prepayment charges are not part of the EMI and are worth adding to the comparison when choosing between lenders.
The chart shows each year’s instalments split into the two parts. In the first year $89,240 of the $1,07,967 paid is interest; in the twentieth, only $5,084.
Inflation works slowly in a borrower’s favour. The EMI is fixed in money, but money loses value, so each instalment costs less in today’s terms than the one before. At 4% inflation the last of the 240 instalments, $8,997, is worth about $4,106 in today’s money, and the whole $21,59,342 repaid is worth about $14,94,018. That is still more than the $10,00,000 borrowed, because the loan’s 9% is above inflation; the gap is the real cost of the loan. It is not a reason to borrow more. The lighter feel depends on your income rising at least as fast as prices, which nobody guarantees; the EMI does not fall if your income does; and lenders set their rates with expected inflation already in them. Size the EMI against today’s income, and use the today’s-money figure to understand the cost, not to stretch it. This is arithmetic on the figures you enter, not financial advice.
Frequently asked questions
How is EMI calculated?
EMI = P × r × (1 + r)n ÷ [(1 + r)n − 1], where P is the loan, r the monthly rate (annual rate ÷ 1200) and n the number of months. For $10,00,000 at 9% over 20 years that is $8,997 a month.
Does a longer tenure save money?
No. It lowers the EMI but increases the total interest, often by a lot — on the example above, 30 years costs almost twice the loan in interest against about half at 10 years.
What happens to my EMI if the interest rate changes?
On a floating-rate loan the lender either changes the EMI or extends the tenure. Extending the tenure keeps the EMI the same but can add years of interest; it is worth asking which your lender does.
Is the EMI the full cost of the loan?
No. Processing fees, bundled insurance and prepayment or foreclosure charges sit outside the EMI. Compare lenders on the total cost, not the monthly figure alone.
Does inflation make my EMI cheaper?
In today’s money, yes: at 4% inflation the $8,997 EMI due in 20 years is worth about $4,106 today, and the $21,59,342 repaid on the example loan about $14,94,018. But that is still more than the $10,00,000 borrowed whenever the loan rate is above inflation, and the EMI stays the same even if your income does not rise.
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References
- Brealey RA, Myers SC, Allen F. Principles of Corporate Finance. McGraw-Hill. The present value of an annuity, from which the level-payment loan formula follows.
- Reserve Bank of India. Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans. RBI/2023-24/55, 18 August 2023.
- Reserve Bank of India. Key Facts Statement (KFS) for Loans & Advances. Circular, 15 April 2024.
- Central-bank inflation targets used as default inflation by currency: Reserve Bank of India (4% CPI, flexible inflation targeting framework); U.S. Federal Reserve (2% PCE); European Central Bank (2%); Bank of England (2% CPI); Bank of Canada (2%); Reserve Bank of Australia (2–3%); Bangko Sentral ng Pilipinas (3% ± 1). Actual inflation often runs above target.