How EMI Is Calculated: Formula, Example and Ways to Pay Less Interest
2 Oct 2026 · 2 min read · Calculators
EMI (Equated Monthly Instalment) is the fixed amount you pay every month on a loan. Part of it pays the interest and the rest reduces the loan amount (principal).
The EMI formula
EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
- P = loan amount
- r = monthly interest rate = yearly rate ÷ 12 ÷ 100
- n = number of monthly instalments
Worked example
Loan of ₹10,00,000 at 9% a year for 20 years:
- r = 9 ÷ 12 ÷ 100 = 0.0075
- n = 20 × 12 = 240
- EMI = ₹8,997 (approximately)
- Total paid = ₹8,997 × 240 ≈ ₹21.59 lakh
- Total interest ≈ ₹11.59 lakh
In the first month, ₹7,500 of the EMI goes to interest and only about ₹1,497 reduces the principal. That share slowly flips over the years.
How tenure changes the cost
Same ₹10 lakh loan at 9%:
| Tenure | EMI | Total interest |
|---|---|---|
| 10 years | ₹12,668 | ₹5.20 lakh |
| 15 years | ₹10,143 | ₹8.26 lakh |
| 20 years | ₹8,997 | ₹11.59 lakh |
| 30 years | ₹8,046 | ₹18.97 lakh |
A longer tenure lowers the EMI, but you pay much more interest overall.
Ways to pay less interest
- Prepay when you can. Even one extra EMI a year cuts years off a home loan. Try the numbers in the Loan Prepayment Calculator.
- Choose the shortest tenure you can comfortably afford.
- Compare rates — a 0.5% lower rate on a long loan saves a lot.
- Check eligibility before applying with the Loan Eligibility Calculator, so you don't get rejected.
Calculate your EMI
Use the EMI Calculator to see your EMI, total interest and a year-by-year schedule instantly.
These figures are illustrations. Your bank's EMI can differ slightly because of rounding, processing fees or the exact start date.