Complete Guide
What is an EMI?
EMI, or Equated Monthly
Instalment, is a fixed payment amount made by a borrower to a lender on a specified
date every month. Each EMI covers two components — a portion of the outstanding
principal (the loan amount) and the interest accrued on that principal
during the month.
In the early stages of repayment, a larger share of each EMI goes toward interest, while only
a small part reduces the principal. As months pass and the outstanding balance shrinks, the
interest component decreases and the principal component grows. This gradual payoff process is
called amortisation.
EMIs are the standard repayment mechanism for home loans, car loans, personal loans, education
loans, and consumer durable financing across most countries. Because the payment amount stays
constant throughout the tenure, EMIs make monthly budgeting predictable and straightforward.
The EMI Formula Explained
The universally accepted formula for computing an EMI is:
EMI = P × r × (1 + r)n / [(1 + r)n − 1]
- P — Principal loan amount
- r — Monthly interest rate = Annual Rate ÷ 12 ÷ 100
- n — Total repayment period in months
For example, a loan of ৳10,00,000 at
9% per annum for 20 years (240
months):
r = 9 ÷ 12 ÷ 100 = 0.0075. The EMI works out to approximately
৳8,997 per month.
Factors That Affect Your EMI
1. Principal Amount
A larger loan directly increases your monthly EMI. Before borrowing, assess how much of your
net monthly income you can comfortably commit to repayment. Most financial experts recommend
keeping total EMI obligations below 40–50% of take-home pay.
2. Interest Rate
Even a 0.5% difference in the annual rate creates a significant impact over long tenures.
Fixed-rate loans offer payment certainty, while floating-rate loans track benchmark rates and
may revise the EMI or tenure when rates change. Use the calculator above to model both
scenarios.
3. Loan Tenure
Extending tenure reduces your monthly EMI but significantly increases the total interest you
pay over the life of the loan. Shortening the tenure saves money overall but demands a higher
monthly commitment. Use our interactive slider to find the balance that suits your cash flow.
How to Use This EMI Calculator
-
Step 1 — Select your Currency:
Use the currency dropdown at the top-right to choose from 30+ global currencies.
All amounts, symbols, and table values update instantly.
-
Step 2 — Enter Loan Amount:
Drag the slider or type directly. The range scales appropriately depending on the
currency selected.
-
Step 3 — Set Interest Rate:
Enter your lender's quoted annual rate. You can input any value between 0.1% and 50%.
-
Step 4 — Choose Tenure:
Toggle between Months and Years, then adjust the slider to your repayment period.
-
Step 5 — Read Results:
Your Monthly EMI, Total Interest, and Total Payment appear instantly. The doughnut chart
visualises your principal-to-interest ratio at a glance.
-
Step 6 — Review the Schedule:
Switch between Monthly and Yearly views in the amortization table to see exactly how every
payment chips away at your balance.
Smart Borrowing Tips
- Compare EMIs across multiple lenders before signing any loan agreement.
- A larger down payment lowers your principal and saves substantial interest.
- Making even one extra EMI per year can cut years off your tenure.
- Part-prepayments reduce outstanding principal and shrink future interest.
- A higher credit score (750+) typically qualifies you for lower interest rates.
- Always account for processing fees, insurance premiums, and other hidden costs.
Disclaimer: This calculator is for
informational and educational purposes only. Results are indicative. Actual EMI amounts may
vary based on your lender's policies, processing fees, and applicable taxes. Consult a
certified financial advisor before making any loan decisions.