What is EMI?
EMI stands for Equated Monthly Instalment. It is the fixed amount a borrower pays to the lender on a set date every month until the loan is fully repaid. Each instalment has two components: the principal, which is the portion of the loan being repaid, and the interest charged on the outstanding balance.
The Indian credit market is currently passing through a phase of strong-rooted financial growth. It is one of the fastest growing credit markets in the world, recording a CAGR of over 11% year on year. A large number of individuals are availing personal loans, home loans, and car loans to meet their financial goals. Knowing your EMI before you borrow helps you plan your monthly budget and avoid repayment stress.
How can this EMI calculator help you?
Regardless of the type of loan, it is important to know the monthly instalment you will need to pay before you avail it. This EMI calculator helps you in the following ways:
The formula to calculate EMI
The following standardised formula is used to calculate the EMI for any loan:
EMI = [P x R x (1+R)^N] / [(1+R)^N - 1]
In the formula the letters represent the following:
| Variable | Meaning |
|---|---|
| P | The principal loan amount |
| R | The monthly interest rate (annual rate divided by 12 divided by 100) |
| N | The number of monthly instalments (loan tenure in months) |
| EMI | Equated Monthly Instalment |
Example of EMI calculation
If the principal amount is Rs. 10 Lakh with a rate of interest of 10% per annum and a tenure of 5 years (60 months), the monthly interest rate R = 10 / 12 / 100 = 0.00833.
EMI = [10,00,000 x 0.00833 x (1.00833)^60] / [(1.00833)^60 - 1] = Rs. 21,247
The EMI you will be liable to pay is Rs. 21,247 per month. Over 60 months you will pay a total of Rs. 12,74,820, of which Rs. 2,74,820 is the total interest and Rs. 10,00,000 is the principal repaid.
Factors affecting your EMI amount
There are three key factors you need to consider when calculating your equated monthly instalment:
Loan Amount
The loan amount is the principal you borrow from the lender. A higher loan amount results in a higher EMI for the same interest rate and tenure. Making a larger down payment reduces the principal and therefore reduces your monthly outgo.
Rate of Interest
The interest rate is the cost charged by the lender on the outstanding principal. Even a difference of 0.25% can add a meaningful amount to your total interest over a long tenure. Comparing rates from at least three lenders before taking a loan is advisable.
Loan Tenure
A longer tenure reduces your monthly EMI but increases the total interest you pay over the life of the loan. A shorter tenure means a higher monthly payment but significantly lower total interest. Use the amortization schedule in the calculator above to see the exact rupee difference for your specific loan.
Types of EMI calculators
The same EMI formula applies to all loan types. The parameters that differ are the applicable interest rate range, maximum tenure, and eligibility conditions.
Home Loan EMI Calculator
Home loans involve large principal amounts and long tenures of up to 30 years. A small difference in the interest rate can result in lakhs of rupees of additional interest over the full tenure. Use this calculator to evaluate different lenders and decide on a tenure that balances your monthly budget against total interest cost.
Car Loan EMI Calculator
Car loans typically run from 1 to 7 years at interest rates between 8% and 14% per annum. Calculating your EMI before visiting the showroom helps you determine how much down payment to make and ensures the monthly instalment fits within your budget.
Personal Loan EMI Calculator
Personal loans are unsecured loans that carry relatively higher interest rates, typically between 10% and 24% per annum, with tenures of 1 to 5 years. Because the rate is higher, the total interest can be a significant portion of the principal. Calculating the real cost before applying helps you decide whether borrowing is the right choice.
Education Loan EMI Calculator
Education loans often include a moratorium period covering the study duration plus 6 to 12 months after graduation. Repayment begins only after this period ends. Using a calculator helps you plan your finances for the post-graduation phase well in advance.
How to use this EMI calculator
The calculator requires three inputs:
Once you enter the values, the monthly EMI, total interest, and total amount payable are calculated and displayed instantly. You can also expand the amortization schedule to see a year-by-year breakdown of principal repaid, interest paid, and the outstanding balance.