How to Calculate EMI: Formula and a Worked Example

By JzeeTools Team · Published October 1, 2026 · 2 min read

Understand how a loan instalment is calculated, how the period changes the interest you pay, and how to check a bank offer.

EMI stands for equated monthly instalment. It is the fixed amount you pay each month until a loan is repaid. Each payment covers some interest and some of the original loan, called the principal.

The formula

EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)

• P is the loan amount.
• r is the monthly interest rate, which is the yearly rate divided by 12 and by 100.
• n is the number of months.

A worked example

Suppose you borrow 500,000 at 12% a year. The monthly rate is 1% (0.01).

• Over 3 years (36 months), the EMI is about 16,607. You repay 597,858 in total, so the interest is about 97,858.
• Over 5 years (60 months), the EMI falls to about 11,122. You repay 667,333 in total, so the interest is about 167,333.

A longer period lowers each payment, but you pay noticeably more interest overall. That is the trade-off to weigh before you choose a period.

Checking a bank offer

1. Enter the loan amount, the yearly interest rate and the period in the EMI calculator.
2. Compare the EMI and the total interest with the bank's figures.
3. Ask about processing fees, insurance and early-repayment charges. These are usually not part of the basic EMI.

Your bank's figure can differ slightly from any calculator because of fees and rounding. Treat the result as a close estimate and confirm details with the lender.

Tips

• Keep your EMI comfortably below your monthly income, leaving room for other costs.
• If you can, choose the shortest period you can afford.