What is EMI?
EMI stands for Equated Monthly Instalment – a fixed amount you pay to your bank or lender every month until the loan is fully repaid. It includes both principal and interest components.
EMI Formula
The standard EMI formula is: EMI = P × r × (1+r)^n / ((1+r)^n - 1)
Where P = Principal, r = Monthly Interest Rate, n = Tenure in Months.
Example Calculation
For a ?10,00,000 home loan at 8.5% annual interest for 20 years (240 months): Monthly rate = 8.5/12/100 = 0.00708. EMI = 10,00,000 × 0.00708 × (1.00708)^240 / ((1.00708)^240 - 1) = ?8,678 approximately.
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