How Loan EMI Is Calculated (With Examples)
Updated 28 August 2026 · 6 min read
Understand the EMI formula, why early EMIs are mostly interest, and how tenure changes total cost.
The formula
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)
P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of monthly payments.
Example
A ₹10,00,000 loan at 8.5% for 20 years gives an EMI of about ₹8,678. Over 240 months you pay roughly ₹20.83 lakh, so interest is about ₹10.83 lakh — more than the original loan.
Why tenure matters
A longer tenure lowers the EMI but increases total interest. Cutting the same loan to 15 years raises the EMI to about ₹9,847 but saves around ₹3.1 lakh in interest.
Before you decide
Add processing fees, insurance and prepayment charges from your lender's sanction letter. This article is for education, not financial advice.