The numbers here are estimates for understanding how loans work, not financial advice. Your lender’s figure can differ because of fees, insurance, how they count days, or rate changes on a floating-rate loan.
Enter the amount, interest rate and term in the loan calculator to see the monthly payment, total interest and the full repayment schedule.
Calculate an EMIThe EMI formula
An EMI (equated monthly instalment) is a fixed payment that covers that month’s interest and pays off part of the loan, so the balance reaches zero on the last payment. In the US the same thing is simply called the monthly payment, and the formula is identical.
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)
- P is the amount borrowed.
- r is the monthly interest rate as a decimal: the annual rate ÷ 12 ÷ 100.
- n is the number of monthly payments: years × 12.
Worked example
A loan of ₹5,00,000 at 10.5% a year, repaid over 3 years.
r = 10.5 ÷ 12 ÷ 100 = 0.00875, and n = 3 × 12 = 36
(1 + r)^n = 1.00875^36 ≈ 1.368383
EMI = 5,00,000 × 0.00875 × 1.368383 ÷ (1.368383 − 1) = 5,986.68 ÷ 0.368383 ≈ ₹16,251.22
Over 36 months you pay 36 × ₹16,251.22 = ₹5,85,043.92, so the interest costs about ₹85,044. The most common mistake is using the annual rate (0.105) as r, which gives a payment several times too high.
Where each payment goes
Each month’s interest is charged on the balance that’s still outstanding. The payment stays the same, so as the balance falls, less of it goes to interest and more pays off the loan.
| Month | Interest (balance × 0.00875) | Principal (EMI − interest) | Balance after |
|---|---|---|---|
| 1 | ₹4,375.00 | ₹11,876.22 | ₹4,88,123.78 |
| 2 | ₹4,271.08 | ₹11,980.14 | ₹4,76,143.64 |
| 3 | ₹4,166.26 | ₹12,084.96 | ₹4,64,058.68 |
On a 3-year loan the shift is gentle. On a 20-year home loan, interest takes most of each payment for the first several years, which is why the balance seems to barely move at first.
Shorter versus longer loans
The same ₹5,00,000 at 10.5% over different terms:
| Term | EMI | Total interest |
|---|---|---|
| 2 years (24 payments) | ₹23,188.02 | about ₹56,512 |
| 3 years (36 payments) | ₹16,251.22 | about ₹85,044 |
| 5 years (60 payments) | ₹10,746.95 | about ₹1,44,817 |
Stretching the loan from 3 to 5 years cuts the EMI by about a third but raises the total interest by about 70%. A lower EMI isn’t a cheaper loan.
Flat rate versus reducing balance
Some lenders quote a flat rate: interest is charged on the full original amount for the whole term, even though you are paying it down.
| ₹5,00,000 over 3 years | Total interest | EMI |
|---|---|---|
| Flat 10% | 5,00,000 × 10% × 3 = ₹1,50,000 | 6,50,000 ÷ 36 = ₹18,055.56 |
| Reducing balance 10% | about ₹80,809 | ₹16,133.59 |
A flat 10% costs the same as a reducing-balance rate of about 17.9%. When you compare offers, convert flat rates to reducing-balance rates (or compare the EMIs directly) before deciding which is cheaper.
Paying extra early
Back to the 10.5% loan. After 12 payments the balance is about ₹3,50,423. Suppose you pay an extra ₹50,000 then and keep the EMI the same:
- The loan ends after 21 more payments instead of 24, so 3 months early.
- You pay about ₹10,879 less interest overall.
The earlier the extra payment, the bigger the saving, because it stops interest building on that money for longer. Check your loan agreement for prepayment charges first. To see what the same money would earn if you invested it instead, try the compound interest calculator.
When a floating rate changes
On a floating-rate loan the lender recalculates when the rate moves. They either keep the end date and change the EMI, or keep the EMI and change the end date. Using the same loan, suppose the rate rises from 10.5% to 11.5% after 12 payments, with about ₹3,50,423 still owed:
| Lender keeps | Result |
|---|---|
| The end date (24 payments left) | EMI rises from ₹16,251.22 to about ₹16,413.91 |
| The EMI (₹16,251.22) | One extra payment, 25 instead of 24, the last one smaller |
Run the formula again with the new rate, the balance still owed and the months left. On long loans, keeping the EMI can add years rather than months, so ask which option your lender uses.
Check it in a spreadsheet
Excel, Google Sheets and Numbers all have a PMT function that uses the same formula:
=PMT(10.5%/12, 36, -500000) → 16,251.22
The amount is entered as a negative number so the payment comes out positive. If the result is several times too large (about ₹53,983 here), the rate wasn’t divided by 12.