About EMI
EMI (Equated Monthly Instalment) is the fixed monthly payment a borrower makes to a lender over a specified tenure. It covers both principal and interest, calculated so that the loan is fully repaid at the end of the term.
EMI = P · r · (1+r)ⁿ / ((1+r)ⁿ − 1)
Where P is the principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the number of months. If the rate is zero, the EMI is simply the principal divided by the number of months.
Worked example
Suppose you borrow $20,000 at 9% a year for 5 years.
- Monthly rate: 9 ÷ 12 ÷ 100 = 0.0075.
- Number of payments: 5 × 12 = 60.
- Growth factor: 1.0075⁶⁰ ≈ 1.56568.
- EMI: $20,000 × 0.0075 × 1.56568 ÷ (1.56568 − 1) = $415.17 a month.
- Total repaid: $415.17 × 60 ≈ $24,910.03, so the interest cost is $4,910.03.
In month one, interest is $20,000 × 0.0075 = $150, so $265.17 of your first EMI repays principal. By the final months almost the whole EMI is principal.
How tenure changes the EMI
| Tenure | Monthly EMI | Total interest | Total repaid |
|---|---|---|---|
| 1 year | $1,749.03 | $988.35 | $20,988.35 |
| 2 years | $913.69 | $1,928.68 | $21,928.68 |
| 3 years | $635.99 | $2,895.81 | $22,895.81 |
| 4 years | $497.70 | $3,889.64 | $23,889.64 |
| 5 years | $415.17 | $4,910.03 | $24,910.03 |
| 6 years | $360.51 | $5,956.77 | $25,956.77 |
| 7 years | $321.78 | $7,029.65 | $27,029.65 |
Stretching from 5 to 7 years cuts the EMI by about $93 but adds more than $2,100 of interest. Pick the shortest tenure whose EMI fits comfortably in your monthly budget.
How the rate changes the EMI
On the same $20,000 over 5 years, the EMI is $386.66 at 6% ($3,199.36 interest), $415.17 at 9% ($4,910.03), $444.89 at 12% ($6,693.34) and $475.80 at 15% ($8,547.92). A few percentage points can add thousands to the cost, so it pays to compare offers before you sign.
Before you borrow
- Check the rate type. This calculator assumes a fixed rate. A floating rate can change your EMI or tenure later.
- Watch flat-rate quotes. Some lenders quote a flat rate charged on the original amount for the whole term. Its true reducing-balance rate is much higher, so ask for the reducing-balance rate before comparing.
- Ask about prepayment. Paying extra early saves the most interest, but some loans charge a fee for it.
- Add the fees. Processing fees and insurance raise the real cost beyond the interest shown here.
Figures are estimates for comparison only, not a loan offer or financial advice.