Principal (P)
Annual reducing balance rate
Repayment period in years
Monthly EMI
₹0
Total Interest
₹0
Total Payment
₹0
Year-wise Schedule
| Year | Principal | Interest | Total Paid | Balance |
|---|
The EMI Formula Explained
The standard EMI formula used by all Indian banks is:
EMI = [P × r × (1+r)^n] ÷ [(1+r)^n − 1]
Where:
- P = Principal loan amount (₹)
- r = Monthly interest rate = Annual Rate ÷ 12 ÷ 100
- n = Number of monthly instalments = Years × 12
Example: For a ₹10,00,000 loan at 10% p.a. for 5 years: r = 10/12/100 = 0.00833, n = 60. EMI = ₹21,247.
When rate = 0 (0% EMI schemes): EMI = P / n (simple division).
Frequently Asked Questions
How does the EMI formula work mathematically?
The EMI formula is derived from the Present Value of Annuity formula. It finds the fixed payment that, when discounted at the monthly interest rate and summed over all periods, equals the original loan amount (present value).
What changes EMI more — rate or tenure?
Changing the tenure has a larger impact on EMI amount (longer tenure = lower EMI), but changing the rate has a larger impact on total interest paid (higher rate = much more interest over long tenures like 20+ years).