Money Guides
How EMI Is Calculated
Understand the formula behind your loan EMI and how interest and tenure change what you pay.
OEWER Team1 min read
An EMI, or equated monthly instalment, is the fixed amount you pay each month until a loan is cleared. Each payment covers part of the interest and part of the principal.
The EMI formula
EMI = P x r x (1 + r)^n / ((1 + r)^n - 1), where P is the loan amount, r is the monthly interest rate (annual rate divided by 12 and by 100) and n is the number of monthly instalments.
What changes your EMI
- A higher loan amount raises the EMI.
- A higher interest rate raises the EMI.
- A longer tenure lowers the EMI but increases the total interest paid.
Try it yourself
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