How EMI Is Calculated

An EMI (Equated Monthly Instalment) is the fixed amount you pay every month until your loan is repaid. Each EMI has two parts: interest on the amount you still owe, and a repayment of principal. This guide shows how the EMI is worked out so you can check any loan offer yourself, or just use our EMI calculator.

The EMI Formula

• P is the loan amount (principal).
• r is the monthly interest rate: the yearly rate ÷ 12 ÷ 100. For 18% a year, r = 0.015.
• n is the number of monthly instalments (the tenure in months).

Worked Example

Take a loan of ₹1,00,000 at 18% a year for 12 months. Here r = 18 ÷ 12 ÷ 100 = 0.015 and n = 12. Putting these into the formula gives an EMI of ₹9,168. Over 12 months you repay ₹1,10,016, so the total interest is ₹10,016.

The first few months of the repayment schedule look like this:

Interest is charged on the reducing balance, so the interest part falls every month and more of your EMI goes towards the principal.

How Tenure Changes Your EMI

A longer tenure lowers the EMI but increases the total interest. For the same ₹1,00,000 at 18% a year:

How the Interest Rate Changes Your EMI

For ₹1,00,000 over 12 months, at different yearly rates within our range of 10.5% to 24% per annum:

EMI Is Not the Whole Cost

The EMI covers interest and principal only. A loan may also have a processing fee, GST and other charges. To compare loans properly, look at the APR (Annual Percentage Rate) and the total cost of the loan, both shown in the Key Fact Statement before you sign. See a full worked example with fees on our interest rates and charges page.

Paying Off Early

If you part-prepay, you can either lower your EMI or shorten your tenure, and either way you pay less interest. A prepayment or foreclosure charge may apply; see the charges for each personal loan, business loan and travel loan.