How to Calculate a Loan Payment (EMI)
EMI stands for Equated Monthly Instalment — the fixed amount you pay every month on a loan until it is fully repaid. It is calculated using the same amortisation formula as a mortgage, and every payment covers both interest (the cost of borrowing) and principal (the portion that reduces what you owe). Understanding EMI lets you compare loan offers on equal terms.
Last updated: March 31, 2026
The Formula
EMI = P × [r(1+r)^n] ÷ [(1+r)^n − 1]
Variable Definitions
| Symbol | Name | Description |
|---|---|---|
| EMI | Monthly Payment | The fixed monthly amount due for the life of the loan |
| P | Principal | The total amount borrowed |
| r | Monthly Interest Rate | Annual interest rate divided by 12, expressed as a decimal |
| n | Total Payments | Loan term in months (e.g., 5 years = 60 months) |
Step-by-Step Example
You take a $22,000 car loan at 7.2% annual interest for 5 years (60 months).
Given
Solution
- 1Calculate (1 + r)^n:
(1.006)^60 ≈ 1.4320 - 2Calculate numerator: r × (1+r)^n:
0.006 × 1.4320 = 0.008592 - 3Calculate denominator: (1+r)^n − 1:
1.4320 − 1 = 0.4320 - 4Divide and multiply by principal:
22,000 × (0.008592 ÷ 0.4320) = 22,000 × 0.019889 = $437.56
Monthly payment (EMI) is $437.56. Total repaid over 60 months: $26,254. Total interest paid: $4,254.
Ready to calculate?
Use the free Loan / EMI Calculator — instant results, no sign-up.
Common Mistakes to Avoid
Entering the annual rate directly instead of dividing by 12 — always convert to a monthly rate first.
Entering the term in years instead of months — the formula requires the number of monthly payments, not years.
Comparing APR across loan types without checking if fees are included — some lenders quote APR inclusive of fees, others do not.
Ignoring the total interest paid over the full term — a lower monthly payment from a longer term often costs significantly more in total.