Finance Loans & EMI

What is EMI and how is it calculated?

QUICK ANSWER

EMI (Equated Monthly Installment) is a fixed payment amount made by a borrower to a lender at a specified date each calendar month.

Detailed Explanation

An Equated Monthly Installment (EMI) consists of both principal and interest components. In the early tenure of the loan, a larger portion of the EMI goes towards interest repayment. As the loan matures, a larger portion reduces the principal amount. The standard formula for EMI calculation is: EMI = P × r × (1 + r)^n / ((1 + r)^n - 1) where P is Principal Loan Amount, r is monthly interest rate, and n is tenure in months.
Data Attribution & Rights
Source: Reserve Bank of India (RBI) Banking Guidelines (Open Data License)

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💡 DID YOU KNOW?

Prepaying just 1 extra EMI per year on a 20-year home loan can reduce your overall loan tenure by up to 4 years.

Source: Financial Planning Advisory Board (2026-09-16) Calculate your EMI savings