What is EMI?
EMI (Equated Monthly Installment) is the amount that you have to pay every month to the bank or any other financial institution until the loan amount is completely paid off.
EMIs make it easier for normal people like you and me to make big-ticket purchases like a house or a car and pay the amount in smaller installments through our regular salary or income. Taking a loan on an EMI is very common, and most of you reading this article might have already taken some loan or may be planning to take a loan.
The monthly installments that you pay to the bank consist of an interest component and a principal component. The interest component completely goes to the bank. The principal component of the EMI is the amount that is reduced from your overall loan amount. The interest component of the EMI is higher during the initial months of the loan payment schedule and gradually reduces with each payment. With each successive EMI payment, your payment towards the principal grows, and the payment towards the interest reduces.
The exact allocation of the interest and principal components of your EMI depends on the interest rate. If you take a loan at a higher interest rate, the interest amount that you pay to the bank will also be higher.
Here’s the formula to calculate EMI:
EMI Formula:
Where:
- E is the EMI
- P is the Principal Loan Amount
- r is the rate of interest calculated on a monthly basis. (i.e.,
r = Rate of interest per annum / 12 / 100) - n is the loan tenure in number of months
For example, if you avail a loan of ₹10,00,000 from the bank at an annual interest rate of 7.5% for a period of 10 years (i.e., 120 months), then:
EMI = ₹10,00,000 * 0.00625 * (1 + 0.00625)120 / ((1 + 0.00625)120 - 1) = ₹11,870
You will have to pay ₹11,870 for 120 months to repay the entire loan amount. The total amount payable will be ₹14,24,400, including ₹4,24,400 as interest towards the loan.
Calculating EMI for your loan using the above formula manually or through Excel is time-consuming and error-prone. Our simple and easy-to-use EMI calculator helps you calculate your EMI instantly and provides additional information like EMI payment schedules in the form of visual charts and tables.
How to Use EMI Calculator?
Our EMI calculator provides a simple and intuitive interface to calculate EMIs instantly. You can calculate EMI for home loans, personal loans, car loans, bike loans, education loans, gold loans, land loans, home construction loans, or any other type of loan provided by banks or non-banking financial institutions.
To calculate EMI, enter the following information:
- Principal loan amount (in the selected currency)
- Rate of interest (in percentage terms, either per annum or per month)
- Loan tenure (in years or months)
Once the values are entered, the calculator will automatically compute the EMI based on the inputs you have provided. It will display your monthly EMI, the total interest payable during the entire tenure, and the total payment including principal and interest.
The EMI calculator also shows a pie chart that breaks down the total payment, showing how much goes toward the principal loan amount and how much toward interest.
Additionally, we provide the payment schedule (also known as the amortization schedule). The payment schedule starts from the current month by default, but you can change it by selecting the month from which the payment should start. It shows the breakdown of principal and interest for each year, and the table displays even more details, including the remaining loan balance.