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Understanding EMI: Overview, Calculation, Examples, and Interest Rate Explained

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August 10, 2023


What’s Inside

India's borrowing sector is growing rapidly, with people availing themselves of personal, home, and education loans from banks and non-banking financial sectors. These loans are repaid through EMIs, calculated using an EMI calculator.

What is equated monthly installment (EMI)?

EMI or equated monthly installment is a fixed payment that must be made to the lender at regular intervals. To repay a loan successfully, you need to calculate a comfortable monthly installment amount, taking into account the following factors:

1. Tenure of the loan

The length of your loan affects your monthly payment. Longer loans mean higher overall repayment and more interest paid in the long run. However, longer loans also result in smaller monthly payments. Shorter loans require less interest but slightly higher monthly payments.

2. Rate of interest

The rate of interest that applies to your loan is also used to calculate your EMI. The higher the interest rate, the higher the monthly installment.

3. Loan amount

Based on the total amount of loan sanctioned, your monthly instalment will be decided.

What is an EMI calculator?

An EMI calculator estimates the monthly payment needed to repay a loan by considering factors such as loan tenure, interest rate, and amount borrowed.

Here is how an EMI calculator can help you:

1. Gives you an estimate: An EMI calculator helps you get an estimate of the monthly instalment you need to pay for a loan. This helps you make an informed decision.

2. Financial planning: EMI calculators help you plan your finances by giving you a clear picture of your monthly obligations if you take on a specific loan.

3. Compare different options: You can use an EMI calculator from Fi Money to compare different loan options with varying interest rates and tenures to see which one suits your budget and financial goals.

How to calculate EMI?

EMI calculators calculate your monthly instalment when you simply enter the principal amount, the tenure of your loan and the rate of interest.

This standard equated monthly instalment formula is used to calculate your monthly instalment.

EMI = [P x R x (1+R) ^ T] / [(1+R) ^ (T-1)]

Where P is the principal loan amount, R is the rate of interest and T is the term of the loan.

Taking an example to understand this, let us suppose you took a loan of Rs. 10 lakhs at 9.2% interest for 5 years. Using the above formula, your equated monthly instalment would be Rs. 20,856.

Principal loan amount

Rs. 10,00,000

Tenure of the loan

5 years

Interest rate


Total interest

Rs. 2,51,360

Equated Monthly Installment (EMI)

Rs. 20,856

In conclusion

Use this EMI calculator for secured or unsecured loans to get a quick estimate of your monthly instalment. Be well prepared before availing a loan and successfully repay your loan in comfortable instalments. For instant loans, try Fi.

Fi Money provides instant loans that arrive directly in your savings account. These are pre-approved personal loans made available to select users with good credit scores. On Fi, this process is 100% paperless, and the loans are provided at competitive interest rates — where each user remains in control with complete visibility of all details. Plus, you can avoid EMI late fees by setting up automatic in-app payments. Our licensed partner bank assigns an eligible loan amount to each user (up to ₹5 lakh).

Frequently Asked Questions

1. What does EMI stand for?

EMI stands for equated monthly instalment and it is the amount that needs to be paid to the lender every month to repay the loan.

2. How are EMIs are calculated?

EMIs are calculated using the simple formula:

EMI = [P x R x (1+R) ^ T] / [(1+R) ^ (T-1)]

where P is the principal loan amount, R is the rate of interest and T is the term of the loan.

Factors affecting the EMI amount are the total principal amount of the loan, the rate of interest and the loan tenure.

3. What are some examples of loans where EMIs are commonly used, such as home, car, or personal loans?

EMIs are used for all kinds of secured and unsecured loans including personal loans, home loans, car loans and education loans.

4. How does the interest rate impact the EMI amount and the overall cost of the loan?

The higher the interest rate of a loan, the higher the EMI amount and the overall cost of the loan.

5. Are there any pros or cons to choosing a high or low EMI for a loan?

Higher EMI: Faster loan repayment, the lower interest cost, but a bigger monthly financial burden.

Lower EMI: Greater flexibility, more disposable income, but longer loan tenure and higher overall interest cost.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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