How EMI Is Calculated
Understand how Equated Monthly Installments (EMI) are calculated for loans.
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What is EMI?
EMI stands for Equated Monthly Installment. It is a fixed payment amount made by a borrower to a lender at a specified date each calendar month.
EMI Formula
EMI = P x r x (1+r)^n / ((1+r)^n - 1)
Where:
P = Principal loan amount
r = Monthly interest rate (annual rate / 12)
n = Number of monthly installments
Example
Loan amount: 10,00,000
Annual interest rate: 8.5%
Tenure: 20 years (240 months)
Monthly rate: 8.5/12/100 = 0.007083
EMI = 10,00,000 x 0.007083 x (1.007083)^240 / ((1.007083)^240 - 1) = 8,678