How EMI Is Calculated: Formula, Amortization, and Loan Tips
Last updated: 2026-09-11 • Editorial Staff
An Equated Monthly Installment (EMI) is the fixed monthly payment a borrower pays to a bank or financial institution until a loan is fully paid off.
Understanding how EMI formulas split your payments between principal reduction and interest charges empowers you to choose optimal loan tenures and save thousands in interest.
The Reducing Balance EMI Formula
EMI = [P × R × (1+R)^N] ÷ [(1+R)^N - 1]
Where P = Principal Loan Amount, R = Monthly Interest Rate (Annual Rate ÷ 12 ÷ 100), N = Total Tenure in Months.
In the early years of a long-term loan, a major portion of each monthly EMI goes toward paying interest, while principal repayment accelerates toward the end of the tenure.
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