Loan / EMI Calculator Guide: Formula & Worked Example
Short answer
Monthly payment, total interest and total cost of any loan. In the fixed example below, monthly payment (emi) is 2,027.64. Your answer depends on the inputs and assumptions you choose.
Formula
EMI = P × r × (1+r)ⁿ / ((1+r)ⁿ − 1)
Use the relationship above with consistent units. The inputs are loan amount, interest rate, loan term, extra monthly payment (optional). Use the input scale shown beside each field and keep time periods and units consistent. Only round the final result for display.
Worked example
- Loan amount
- 100000
- Interest rate
- 8
- Loan term
- 5
- Extra monthly payment (optional)
- 0
- Monthly payment (EMI): 2,027.64
- Number of payments: 60
- Total of payments: 121,658.37
- Total interest: 21,658.37
Understanding the result
Monthly payment, total interest and total cost of any loan. Start with the base example, then replace each value with the figure that matches your situation.
Loan amount
The example uses 100000 for loan amount. This is an illustration, not a recommended value. Keep the unit and time period shown by the field.
Interest rate
The example uses 8 % / yr for interest rate. This is an illustration, not a recommended value. Keep the unit and time period shown by the field.
Loan term
The example uses 5 years for loan term. This is an illustration, not a recommended value. Keep the unit and time period shown by the field.
Extra monthly payment (optional)
The example uses 0 for extra monthly payment (optional). This is an illustration, not a recommended value. Keep the unit and time period shown by the field.
What the comparison means
The comparison changes only loan amount, keeping every other example input fixed. This isolates that input's effect on the primary result. It does not predict future outcomes.
Rates, fees, eligibility, local tax rules and provider rounding can change the final amount. Reference tax and exchange-rate data may be outdated; verify the official source before deciding.
How an amortizing loan really works
Each monthly payment is the same, but its split changes. Early payments are mostly interest because interest is charged on the full balance. As the balance falls, more of every payment goes to principal. That is why extra payments made early in a loan save far more interest than the same extra payments made near the end.
Rate vs term: what changes your total cost most
| Change on a 100,000 loan at 8% for 5 years | Monthly payment | Total interest | |---|---|---| | Base case | about 2,028 | about 21,660 | | Rate drops to 6% | about 1,933 | about 15,997 | | Term stretches to 7 years | about 1,559 | about 30,925 |
A longer term lowers the payment but increases the total interest you pay. A lower rate reduces both.
People also ask
What is EMI?
EMI (equated monthly instalment) is the fixed monthly payment that repays a loan's principal and interest in full by the end of the term. It is the same formula US lenders use for a fixed-rate monthly payment.
Is APR the same as the interest rate?
No. The interest rate is the cost of borrowing the principal. APR adds most lender fees and spreads them over the term, so it is the better number for comparing offers. US lenders must disclose APR under the Truth in Lending Act.
Should I prepay a loan or invest the money?
Compare the loan's after-tax interest rate with the realistic after-tax return of the investment. Paying off an 8% loan is a guaranteed 8% "return"; keep an emergency fund before making large prepayments, and check for prepayment penalties.
How much loan can I afford?
A common guideline is to keep all monthly debt payments under about 36% of gross monthly income. Lenders apply their own limits.
Comparison
| Scenario | Input | Result |
|---|---|---|
| Lower input | Loan amount: 80000 | Monthly payment (EMI): 1,622.11 |
| Base example | Loan amount: 100000 | Monthly payment (EMI): 2,027.64 |
| Higher input | Loan amount: 120000 | Monthly payment (EMI): 2,433.17 |
Common mistakes
- Using the wrong units for loan amount.
- Comparing results while changing more than one input at a time.
- Rates, fees, eligibility, local tax rules and provider rounding can change the final amount. Reference tax and exchange-rate data may be outdated; verify the official source before deciding.
Checklist
- Confirm loan amount.
- Confirm interest rate is expressed in % / yr.
- Confirm loan term is expressed in years.
- Confirm extra monthly payment (optional).
- Check the result against your source or provider.
Calculators Percentage Editorial Team
Calculator guides from the Calculators Percentage team. These introductory examples are educational, not professional advice.
Last reviewed:
Rates, fees, eligibility, local tax rules and provider rounding can change the final amount. Reference tax and exchange-rate data may be outdated; verify the official source before deciding.