The EMI formula
Every EMI-based loan in India — home loans, car loans, personal loans — uses the same underlying math, called the reducing-balance (or amortizing) method. The formula is:
EMI = P × r × (1 + r)ⁿ / ((1 + r)ⁿ − 1)
Here, P is the principal (the amount you borrow), r is the monthly interest rate (your annual rate divided by 12, then divided by 100 to convert from a percentage), and n is the total number of monthly installments (your tenure in years multiplied by 12).
Why "reducing balance"?
Interest is charged only on the outstanding principal, not the original loan amount. As you pay each EMI, part of it goes toward interest (calculated on what you still owe) and the rest reduces the principal. Early in the loan, a larger share of each EMI goes to interest, since the outstanding balance is still high; later, more of each EMI goes toward principal, since the balance has shrunk.
Worked example
Take a ₹5,00,000 loan at 8.5% annual interest for 20 years (240 months). The monthly rate r = 8.5 ÷ 12 ÷ 100 = 0.0070833. Plugging into the formula gives a monthly EMI of ₹4,339.12 — meaning you pay ₹4,339.12 every month for 240 months, for a total repayment of ₹10,41,389.19, of which ₹5,41,389.19 is interest.
Use the EMI Calculator below to run this for your own loan amount, rate, and tenure — the same formula, computed instantly.
What changes your EMI
Three things determine your EMI: the loan amount (higher principal means a higher EMI, proportionally), the interest rate (even a 0.5% difference can meaningfully change your total interest over a long tenure), and the tenure (a longer tenure lowers your monthly EMI but increases the total interest you pay over the life of the loan).