Loan EMI Calculator

Understanding the EMI Formula

Equated Monthly Installment (EMI) is the fixed payment amount made by a borrower to a lender at a specified date each calendar month. EMIs are used to pay off both interest and principal every month, so that over a certain number of years, the entire loan is paid off.

How Your EMI is Calculated:

The standard mathematical formula to calculate EMI is:

EMI = P × R × (1 + R)^N / ((1 + R)^N – 1)

Where:

• P = Principal Loan Amount (the initial amount borrowed)
• R = Monthly Interest Rate (calculated as Annual Interest Rate / 12 / 100)
• N = Loan Tenure in Months (total number of months for repayment)

Let's Break Down the Calculation:

1. Determine the Principal (P): This is the total amount of money you are borrowing. Example: If you take a loan of $10,000, then P = 10,000.
2. Calculate the Monthly Interest Rate (R): Your annual interest rate needs to be converted to a monthly rate and then into a decimal.
   • Divide the Annual Interest Rate by 12 (for monthly).
   • Divide that result by 100 (to convert percentage to decimal).
   Example: If the annual interest rate is 9% (0.09), then R = 0.09 / 12 = 0.0075.
3. Determine the Loan Tenure in Months (N): Convert your loan period from years to months. Example: If your loan tenure is 5 years, then N = 5 * 12 = 60 months.
4. Apply the Formula: Plug these values into the EMI formula:

   EMI = P × R × (1 + R)^N / ((1 + R)^N – 1)

   This calculation provides the fixed amount you will pay each month. Our calculator performs these complex calculations instantly for you!

Understanding how EMI is calculated can help you make informed decisions about your loan repayments and financial planning.