What is EMI?

EMI stands for Equated Monthly Installment — the fixed amount you pay every month until a loan is fully repaid. Each payment covers both interest and a portion of the principal.

How is EMI calculated?

The formula is:

EMI = P × r / (1 − (1 + r)^(−n))

Where:

• P = Principal (loan amount)
• r = Monthly interest rate (annual rate ÷ 12 ÷ 100)
• n = Total number of monthly payments (years × 12)

Example

A $20,000 loan at 7% annual interest for 5 years:

• Monthly rate r = 7 / 100 / 12 = 0.005833
• n = 5 × 12 = 60
• EMI ≈ $396.02
• Total paid: $23,761.44
• Total interest: $3,761.44

What changes EMI?

Factor	Effect
Higher principal	Higher EMI
Higher interest rate	Higher EMI
Longer term	Lower EMI, more total interest
Shorter term	Higher EMI, less total interest

Try it yourself

Use the Loan / EMI Calculator to calculate your exact monthly payment with your own numbers.