How to Calculate Loan EMI: Formula, Example & Apps
Short answer: EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of monthly payments. For ₹5,00,000 at 9% a year over 5 years, the EMI is about ₹10,379.
An EMI (equated monthly instalment) is the fixed amount you pay your lender each month until a loan is repaid. It's the same every month, but the mix changes: early payments are mostly interest, later ones mostly principal. This guide shows how to work it out, so you can check any calculator, including the ones on your phone.
What is the EMI formula?
EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
- P is the principal, the amount you borrow.
- r is the monthly rate. Divide the annual rate by 12, then by 100. A 9% annual rate becomes 9 ÷ 12 ÷ 100 = 0.0075.
- n is the tenure in months. Five years is 60.
What does a worked EMI example look like?
Borrow ₹5,00,000 at 9% a year for 5 years (60 months):
- r = 9 ÷ 12 ÷ 100 = 0.0075
- (1 + r)ⁿ = 1.0075⁶⁰ ≈ 1.5657
- EMI = 5,00,000 × 0.0075 × 1.5657 ÷ (1.5657 − 1) = 3,750 × 2.7679 ≈ ₹10,379
Over the whole loan you pay 60 × ₹10,379 ≈ ₹6,22,751, so the interest is about ₹1,22,751.
How do rate and tenure change the cost?
Same ₹5,00,000 loan, three variations:
| Annual rate | Tenure | EMI per month | Total interest |
|---|---|---|---|
| 9% | 5 years | ₹10,379 | ₹1,22,751 |
| 9% | 7 years | ₹8,045 | ₹1,75,741 |
| 10% | 5 years | ₹10,624 | ₹1,37,411 |
Two lessons:
- A longer tenure lowers your EMI but costs far more in total. Stretching from 5 to 7 years saves about ₹2,300 a month and adds about ₹53,000 in interest.
- One percentage point matters. A 1% higher rate adds roughly ₹14,700 over five years on this loan.
The maths is identical for any currency; only the symbol changes.
What's the difference between flat and reducing-balance interest?
Ask your lender which one they use, because it changes the real cost a lot.
- Reducing balance charges interest on the outstanding amount, which falls as you repay. The EMI formula above assumes this.
- Flat rate charges interest on the original amount for the whole term, even though you've repaid part of it. A flat rate that looks low can be close to double as an equivalent reducing-balance rate.
Compare loans using the effective annual rate, not the headline number.
Can I reduce the interest I pay?
- Pay a bit extra when you can, and tell the lender it's for principal reduction. Check the prepayment rules and any fee first.
- Choose the shortest tenure you can afford. Total interest rises quickly with tenure.
- Compare lenders on total cost, including processing fees, not only on the EMI.
What should I look for in an EMI calculator app?
Check that it:
- Lets you enter amount, rate and tenure in years or months.
- Shows the total interest and total payable, not just the EMI.
- States whether it assumes reducing balance.
- Matches the formula above for a test case you've calculated yourself.
We list two EMI tools. From their App Store listings, EMI Calculator - Finance Tool provides EMI calculations for home, car and personal loans, and Loan Calculator & EMI Planner adds a loan comparison tool, home loan and mortgage calculators, simple and compound interest, SIP and tax/GST calculators. Be careful with both: they have almost no ratings so far (3.67★ from 3 ratings and 1.0★ from 1 rating), so there isn't enough feedback to trust their output blindly. Check any result against the formula or your lender's repayment schedule before making a decision. See our guide to budget, loan and money apps for other options.
Related reading
- Budget App vs Spreadsheet: Which Is Better for Expenses?
- How to See and Cancel Subscriptions on iPhone
Frequently asked questions
What is the formula to calculate EMI?
EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where P is the loan amount, r is the monthly interest rate and n is the number of monthly instalments.
How do I calculate EMI for a home loan?
Use the same formula. Enter the loan amount as P, divide the annual rate by 12 and by 100 for r, and use the tenure in months for n. A home loan is usually reducing balance.
Does a longer loan tenure reduce EMI?
Yes, it lowers the monthly payment, but you pay more total interest because the balance stays outstanding for longer.
How accurate are EMI calculator apps?
They should match the formula for a standard reducing-balance loan. Differences usually come from fees, rounding, flat-rate assumptions or changing rates, so confirm with your lender's schedule.
EMI Calculator - Finance Tool
Loan Calculator & EMI Planner