How is loan EMI calculated?
Using the standard amortization formula EMI = P·r·(1+r)^n / ((1+r)^n−1). r is the monthly interest rate and n is the total number of monthly payments.
Calculate your exact monthly loan payment, total interest, and full amortization schedule. Works for personal loans, car loans, student loans, and home loans.
EMI = P × r × (1 + r)^n / ((1 + r)^n − 1), where P = principal, r = monthly rate, n = months.
A $20,000 loan at 10% APR for 5 years gives r = 0.10/12 ≈ 0.00833 and n = 60. The EMI works out to roughly $424.94/month, with $5,496 paid in total interest.
Using the standard amortization formula EMI = P·r·(1+r)^n / ((1+r)^n−1). r is the monthly interest rate and n is the total number of monthly payments.
Yes — a longer term reduces the monthly payment but sharply increases total interest paid. A 7-year term saves about $70/month vs a 5-year on $20,000 at 10%, but costs an extra ~$2,300 in interest.
Amortization is the schedule that splits every payment into principal and interest. Early payments are mostly interest; principal repayment accelerates over time.
Yes. Any extra payment goes 100% to principal, cutting future interest. Even one extra EMI per year can shorten a 5-year loan by ~8 months.
The interest rate is the raw cost of borrowing. APR bundles the interest rate plus fees (origination, insurance) into a single annualised figure, so it's a fairer lender-to-lender comparison.
No — it shows principal and interest only. Add origination fees, GST, and insurance separately for a full cost picture.
EMI uses the amortization formula: EMI = P × r × (1 + r)^n / ((1 + r)^n − 1). Step 1: take the principal P (loan amount). Step 2: convert the annual interest rate to a monthly rate r = APR ÷ 12 ÷ 100. Step 3: convert tenure to months n = years × 12. Step 4: plug in and solve. Example — $20,000 at 10% APR for 5 years: P=20000, r=0.00833, n=60 → EMI ≈ $424.94/month, total interest ≈ $5,496.
On a $300,000 loan at 7% for 30 years, a one-time $10,000 prepayment in year 2 saves roughly $28,000–$32,000 in interest and shortens the tenure by about 14 months (when the saving is applied to tenure, not EMI).
Reducing balance charges interest only on the outstanding principal each month, so real APR ≈ quoted rate. Flat rate charges interest on the original principal for the full tenure — effective APR is usually 1.7–1.9× the quoted rate. Always insist on reducing-balance quotes.
Yes — re-run the calculator with the remaining balance as the new principal, the remaining months as the new tenure, and the new rate. The difference between the two EMIs is your rate-hike impact.
Banks often add processing fees, GST on interest, insurance premiums, and use a slightly different day-count convention (actual/365 vs 30/360). The base EMI matches; the total payable differs because of these add-ons.
Reducing tenure almost always saves more interest because you compress the high-interest early years. Reduce EMI only if cash-flow relief is more important than total interest saved.