How to Calculate Loan EMI: The Complete Formula Explained

The EMI formula looks intimidating but it's straightforward once broken down. Here's exactly how banks calculate your monthly payment.

EMI = P × r × (1+r)ⁿ / ((1+r)ⁿ - 1)

Where: P = Principal, r = monthly rate (annual÷12÷100), n = total months

Worked Example

Rs. 1,000,000 at 18% annual interest for 5 years:

Monthly rate: r = 0.015

Payments: n = 60

EMI = Rs. 25,393/month

Total paid: Rs. 1,523,580

Total interest: Rs. 523,580

Doubling tenure from 5 to 10 years reduces EMI 29% but more than doubles total interest paid.

Making one extra EMI payment per year on the example above saves ~Rs. 45,000 in interest and shortens the loan by ~2.5 months.

Calculate your loan with our Loan Calculator — generates full amortization schedule.

Written by the GMC Tools team

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