EMI stands for Equated Monthly Installment. It is the fixed amount you pay each month to repay a loan over its term. Each EMI payment includes both a principal component (repaying the original borrowed amount) and an interest component (the cost of borrowing). In the early months of a loan, a larger portion of your EMI goes toward interest. As time passes, the interest portion decreases and the principal portion increases.
The EMI formula is: EMI = P x r x (1 + r)^n / ((1 + r)^n - 1), where P is the principal amount, r is the monthly interest rate (annual rate divided by 12), and n is the total number of monthly payments. This formula ensures that the loan is fully repaid by the end of the term with equal monthly payments.
When comparing loan offers, the interest rate is not the only factor to consider. A longer loan term reduces your monthly payment but significantly increases the total interest paid. For example, a $200,000 mortgage at 7% costs about $1,331 per month over 30 years but $1,798 per month over 15 years. The 30-year option costs roughly $279,000 in total interest, while the 15-year option costs about $123,000. Use the sliders above to explore how these tradeoffs work for your specific situation.
EMI stands for Equated Monthly Installment. It is the fixed payment amount a borrower makes to a lender on a specified date each month. The EMI includes both principal repayment and interest charges, calculated so the loan is fully paid off by the end of the term.
A longer loan term reduces your monthly EMI because the repayment is spread over more months. However, you pay significantly more in total interest over the life of the loan. A shorter term means higher monthly payments but much less total interest paid. Use the term slider to compare both scenarios instantly.
Yes. The EMI formula is the same regardless of loan type. Enter the loan amount, annual interest rate, and repayment term for any loan, and the calculator will give you the correct monthly payment, total interest, and total repayment amount.
Interest compounds over the entire loan term, and with long terms like 20 or 30 years, the total interest can exceed the original loan amount. Early payments are mostly interest with little going toward principal. This is normal for amortized loans and is why shorter terms save substantial money on interest.
This calculator assumes standard fixed monthly payments with no extra or prepayments. If you plan to make additional payments, your actual loan will be paid off sooner and you will pay less total interest than shown here. Many lenders allow prepayment, though some may charge a prepayment penalty.