How an EMI is constructed
The equated monthly instalment is the fixed amount a borrower pays each month across the tenure of a loan. It is equated because it never changes, even though what it pays for shifts continuously.
Every retail loan in India is quoted this way, whether for a home, a vehicle or a personal purpose. The arithmetic is identical; only the rate and tenure differ.
The formula behind the number
An amortising loan is repaid in equal instalments. Each one covers the interest that accrued since the last payment, and whatever is left reduces the balance. The instalment that brings the balance to exactly zero on the final payment is:
Here P is the amount borrowed, i is the monthly rate (the annual rate divided by 12) and n is the number of payments. Nothing else enters the calculation, which is why two lenders quoting the same three inputs must arrive at the same instalment.
Worked example: ₹1,000,000 at 9% over 20 years
The calculator opens on this scenario, so you can follow every step:
- Amount borrowed: ₹1,000,000
- Annual rate: 9%, so the monthly rate is 9 ÷ 12 = 0.7500%
- Term: 20 years, so n = 20 × 12 = 240 payments
Paying ₹8,997.26 every month for 240 months comes to ₹2,159,342. Subtract the ₹1,000,000 you actually borrowed and the cost of the credit is ₹1,159,342, or 116% of the sum borrowed.
Where each payment goes
The instalment never changes, but its composition does. The first payment carries ₹7,500.00 of interest and only ₹1,497.26 of principal. By payment 120 the split has moved to ₹5,354.26 interest against ₹3,643.00 principal.
| Payment | Instalment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | ₹8,997.26 | ₹7,500.00 | ₹1,497.26 | ₹998,503 |
| 2 | ₹8,997.26 | ₹7,488.77 | ₹1,508.49 | ₹996,994 |
| 3 | ₹8,997.26 | ₹7,477.46 | ₹1,519.80 | ₹995,474 |
| 120 | ₹8,997.26 | ₹5,354.26 | ₹3,643.00 | ₹710,259 |
| 240 | ₹8,997.26 | ₹66.98 | ₹8,930.28 | ₹0.00 |
At nine percent over twenty years the early instalments are almost entirely interest. Prepayment during the first years therefore removes far more interest than the same sum applied later.
What moves the answer most
Two levers change the total, and they do not pull with equal force.
Add one percentage point to the rate and the instalment goes from ₹8,997.26 to ₹9,650.22, which is ₹156,710 more over the full term. Cut 5 years off the term instead and the instalment rises to ₹10,143, but total interest falls from ₹1,159,342 to ₹825,680. Most lenders allow part-prepayment on floating-rate home loans without penalty. Reducing tenure rather than EMI captures the larger saving.
What this calculator leaves out
Processing fees, insurance bundled with the loan and any prepayment charge on fixed-rate products are excluded. Stamp duty and registration on a property purchase are separate again.
Related calculators
- Two-wheeler EMI calculator — the same structure over a short tenure
- Home loan calculator — the long-tenure case
- Loan balance calculator — the outstanding principal at any point