EMI Formula Explained | Easy Step-by-Step Loan EMI Calculation

EMI Formula Explained Like We’re Having Coffee

So, picture this — you’ve just taken a loan. Maybe it’s for your dream bike, your first home, or to kickstart that side hustle you’ve been thinking about. Now the bank says, “Don’t worry, you’ll just pay a fixed amount every month.” That’s your EMI — Equated Monthly Installment.

It’s kind of like buying something in installments at the mall, except instead of a new phone, you’ve got a giant financial commitment.

Why Your EMI Stays the Same

The trick is in how the payment is split:

• Part of it goes toward paying back the actual money you borrowed (principal).
• The other part covers the interest (the bank’s fee for letting you use their money).

At the start, the interest chunk is big and the principal chunk is small. But as time goes on, the interest shrinks and the principal repayment grows — yet your total monthly payment stays exactly the same.

The Magic Math Behind It

EMI =
(P × r × (1 + r)n) / ((1 + r)n − 1)

Where:

• P = Your loan amount
• r = Monthly interest rate (annual rate ÷ 12 ÷ 100)
• n = Total number of months you’ll be paying

Story-Time Example

Let’s say:

• You borrow ₹5,00,000
• The bank charges 8% per year
• You want to finish paying in 5 years

Your monthly rate is:
0.08 ÷ 12 = 0.006666...

Plug that into the formula and boom — that’s the number you’ll be sending to the bank every month, rain or shine.

💡 Life Hack: If you ever get a bonus or some extra cash, putting a chunk of it toward your loan’s principal can save you a surprising amount in interest over the years.

📈 EMI Calculator

Loan Amount (₹):

Interest Rate (%):

Loan Tenure (Years):

Monthly EMI

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Total Interest

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Total Payment

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📅 EMI Amortization Schedule

Month	Principal Paid	Interest Paid	Remaining Balance

📊 Loan Comparison Table

Loan Amount	Interest Rate	Tenure (Years)	Monthly EMI	Total Interest	Total Payment