Loan EMI Calculation Explained: Save Money on Your Loans

What is EMI?

EMI (Equated Monthly Installment) is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. It consists of both principal and interest components.

The EMI Formula

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

Where:

• P = Principal loan amount
• R = Monthly interest rate (Annual rate / 12 / 100)
• N = Number of monthly installments

How to Reduce Your EMI

1. Increase your down payment: A larger down payment reduces the principal amount
2. Extend the loan tenure: Longer tenure means lower monthly EMI (but more total interest)
3. Negotiate interest rates: Even 0.5% reduction can save thousands
4. Make prepayments: Reduce principal to lower future EMIs

EMI vs Total Interest

While a longer tenure reduces your monthly EMI, it increases the total interest paid over the loan period. Use our loan calculator to find the right balance for your budget.