How Loan EMI is Calculated: Formula and Examples
EMI (Equated Monthly Installment) is the fixed amount you pay every month to repay a loan. It includes both principal and interest portions.
The formula: EMI = P × r × (1+r)^n / ((1+r)^n - 1), where P = loan amount, r = monthly interest rate (annual/12/100), n = number of months.
Example: Loan of $100,000 at 5% annual rate for 10 years (120 months). r = 5/12/100 = 0.00417. EMI = 100000 × 0.00417 × (1.00417)^120 / ((1.00417)^120 - 1) = $1,061.
Total payment = EMI × months = 1,061 × 120 = $127,320. Total interest = $27,320. The interest portion is higher in early months and decreases over time.
Tips: Shorter tenure = higher EMI but less total interest. Longer tenure = lower EMI but more total interest. A 15-year loan at 5% saves ~50% interest compared to a 30-year loan.
Use our Loan/EMI Calculator in the Finance category — it shows monthly payment, total interest, and a visual breakdown.