The EMI formula
Your monthly payment is P × r × (1+r)ⁿ ÷ ((1+r)ⁿ − 1), where P is the amount borrowed, r is the monthly interest rate (annual rate ÷ 12) and n is the number of monthly payments. Early payments are mostly interest; later ones mostly principal.
What drives the payment most
Term length has a bigger effect on total interest than most people expect. Stretching the same loan from 5 to 7 years lowers the monthly payment but can add thousands in interest — compare both numbers, not just the payment.
Frequently asked questions
What is an EMI?
EMI stands for Equated Monthly Installment — a fixed monthly payment that repays a loan's principal and interest over a set term.
Does this work for car and personal loans?
Yes. The formula applies to any fixed-rate amortizing loan: car, personal, student or home.
How can I pay less interest overall?
A shorter term or extra principal payments reduce total interest. Compare the "total interest" figure across different terms above.