EMI Calculator

An equated monthly instalment is the fixed payment that reduces a loan to exactly zero over its term, given a constant interest rate. The formula (P × r × (1+r)^n ÷ ((1+r)^n − 1), where r is the monthly rate and n the number of months) comes from setting the present value of all future payments equal to the amount borrowed. Every instalment is the same size, but its composition is not: early payments are mostly interest and late payments are mostly principal, because interest is charged on the balance still outstanding.

That composition is the practically important part. On a twenty-year home loan at a typical rate, roughly half of the total interest is paid in the first third of the term. It is also why prepayment early in a loan is worth so much more than the same amount later, it removes principal that would otherwise have accrued interest for the remaining years, and why refinancing late in a term often saves far less than the headline rate difference suggests.

What the formula does not include is most of what a loan actually costs. Processing fees, insurance bundled into the disbursal, prepayment penalties and the difference between a fixed and a floating rate all sit outside it. A floating-rate loan's EMI is recalculated whenever the benchmark moves, or the term is extended instead: lenders differ on which, and the difference is substantial over twenty years. Treat the figure here as the arithmetic core of the payment, and read the sanction letter for the rest.