Calculate EMI the Right Way (with the formula)
Most EMI calculators hide the math. Here is the actual formula, a worked example, and the three numbers you should always check before signing.
Equated Monthly Installment (EMI) is the fixed amount you pay every month on a loan. The formula is the same whether you are buying a phone or a house.
The formula
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 months
Worked example
You borrow $20,000 at 9% annual for 5 years (60 months):
- r = 9 ÷ 12 ÷ 100 = 0.0075
- (1 + r)^n = 1.0075^60 ≈ 1.5657
- EMI = 20000 × 0.0075 × 1.5657 / 0.5657 ≈ $415.17
Total paid back: $415.17 × 60 = $24,910 — meaning you pay $4,910 in interest.
The three numbers to always check
Before signing any loan:
- Total interest paid — the part the bank keeps. Often 20–60% of the principal.
- Total cost — EMI × tenure. This is what the loan actually costs you.
- Interest-to-principal ratio in year 1 — early payments are mostly interest. If 80% of year 1 goes to interest, the loan is front-loaded.
Skip the spreadsheet
Use our Loan EMI Calculator — enter principal, rate, and tenure and you get EMI, total interest, and total payable instantly.
For compound interest on savings (the inverse problem), see the Compound Interest Calculator.
Shorter tenure beats lower rate
Cutting your tenure from 30 years to 20 years on a home loan usually saves more money than negotiating 0.25% off the rate. Run both scenarios before you decide.