The most significant thing to do when you take a personal loan is to understand your EMI (Equated Monthly Instalment). Borrowing to travel, emergencies, marriage, and even to consolidate your debts, by calculating your EMI, you can have an idea:

• Your monthly payment amount
• The loan suits your budget or not.
• The impact of interest on the overall interest cost of the loan.
• Influence of changing tenure or amount of loan on EMI.

Here are the steps of how to find the personal loan EMI, the formula and few easy examples to enable you to know how to do it like a pro, though you may not be a good mathematician. We will also demonstrate to you how you can be able to calculate EMI instantly with apps such as CreditMitra.

1. What Is EMI? (Equated Monthly Installment)

EMI is the predetermined value that you are to pay monthly till you complete the loan. In every EMI, there will be two parts:

Principal -the value of what you borrowed.

Interest – the rate of charge of the lender.

Your EMI in the initial months of your loan consists of more interest and less principal. Interest portion declines and the principal portion increases towards the end.

2. Factors That Affect Your EMI

The monthly EMI would be computed with the help of three primary inputs:

Loan Amount (Principal): The more the loan, the more the EMI.

Interest Rate: Increased interest rates imply increased EMIs.

Loan Tenure (Duration): The longer tenure decreases EMI and in turn the interest you pay is high.

3. EMI Formula of Calculation (Standard Mathematical Formula)

The formula that banks, NBFCs and loan apps use is the following:

EMI Formula

EMI=PxRx(1+R)N(1+R)N-\text{EMI} = \frac\{P\times R\times (1+R)^N}{(1+R)^N – 1}EMI=(1+R)N−1P×R×(1+R)N​

Where:

P = Loan Amount

R = Monthly Interest Rate

N= the overall number of monthly EMIs.

4. Manual EMI Calculation:

To figure out the answer we can just use the formula. We do this by following these steps:

Step 1: Take the interest rate and turn it into a monthly rate. This is the thing you need to do when you are working with the annual interest rate and the monthly interest rate. You have to convert the interest rate into a monthly rate so that you can use it to calculate things. The annual interest rate is what you start with. Then you convert it to a monthly rate.

The annual interest rate is 15 %.

Monthly rate
R = 15/12×100 = 0.0125

monthly interest rate is 0.0125

Step 2: Multiply loan amount by monthly interest rate

Let’s take a loan amount of INR 2,00,000.

Now multiply this amount by the monthly interest rate

P × R = 200000 × 0.0125 = 2500

Step 3: Calculate (1+R)n

If you have a loan the time you have to pay it is called the loan tenure. Let us say your loan tenure is 2 years. This is the same, as 24 months. Your loan tenure is 2 years so you have 24 months to pay back the loan.

First add 1 to the monthly rate:

1 + R = 1.0125

Now raise it to the power of 24:

(1.0125)24

Step 4. This is where we apply the EMI formula to calculate our payments. The EMI formula is used to find out how much we have to pay every month for the loan. We will use the EMI formula to get the amount. The EMI formula is important for this step.

We need to apply the EMI formula to get the correct result. The EMI formula will help us to calculate the payments, for the loan. So we have to apply the EMI formula.

EMI = 2500 x (1.0125^24) / (1.0125^24) – 1

This is what people call the EMI for your loan. It is, like a bill that you have to pay for your loan every month.

Your EMI will come to a fixed sum of money that will be paid monthly. This is a complicated calculation – and that is why majority of the borrowers use an EMI calculator.

6. Effect of Loan Tenure on EMI (Sample Table).

Loan Amount	Tenure	Interest Rate	EMI
₹1,00,000	12 months	12%	₹8,885
₹1,00,000	24 months	12%	₹4,707
₹1,00,000	36 months	12%	₹3,321

Conclusion:

The longer tenure = less EMI and greater interest cost.

Less tenure distance = less EMI but greater interest cost.

7. The reason why it is hard to do using manual calculation.

Because you must calculate:

• Exponential values
• Compounding interest
• When comparing monthly and annual interest rates, the former is lower than the latter.
• Total loan cost

This is the reason why the majority of borrowers rely on online EMI calculators to achieve quick and precise results.

8. The creditMitra EMI Calculators How It Works.

Applications such as CreditMitra would automatically compute EMI directly based on the same mathematical equation but automated.

You just enter: Loan Amount Interest Rate & Tenure

And instantly get:Monthly EMI, Total interest, Total payable amount & Amortization breakdown

9. Table of EMI Amortization (Simplified).

For a INR 1 lakh loan at 12% for 1 year:

Month	EMI	Interest	Principal	Balance
1	8,885	1,000	7,885	92,115
6	8,885	550	8,335	51,200
12	8,885	90	8,795	0

Notice how Interest reduces on monthly basis and the principal repayment is augmented.

10. Common Mistakes Borrowers Make in EMI Calculation

Assuming that EMI = principal/ months.

This does not take into account monthly interest.

Ignoring processing fees

Your bank may deduct 1-4% upfront.

Selecting the minimum EMI in place of minimum interest rate.

Less EMI = increased tenure = increased interest in general.

Not comparing lenders

The same borrower will get different rates charged by different lenders.

11. Tips on How to Lower your EMI or the overall cost of the loan.

Improve your credit score

750+ score = lowest interest rates.

Select a more extended tenure (in case you desire lesser EMI)

But overall interest will be higher.

Pay a part-prepayment

This will reduce the value of your principal in your loan and future EMIs.

Comparison of many lenders prior to application.

Elsewhere you can get 2-4% cheaper interest.

Borrow only what you need

Increase in the loan amount – increase in EMI + interest.

12. How CreditMitra Would Assist You in Calculating EMI in Real Time.

CreditMitra eliminates the guesswork in EMI planning. With the CreditMitra application, you will be able to do the following:

• Compare various EMIs ready by various NBFCs and banks.
• Instant check interest rates.
• Real time adjustment of loan amount and tenure.
• check and see how much interest you will pay on your loan and repayment schedule
• Request online personal loans.

It assists you in deciding on the loan according to your budget and not vice versa.

Final Thoughts

One of the most intelligent financial things that you can do prior to borrowing is calculating your personal loan EMI. It provides you with a sense of clarity, planning of the expenses, and makes sure that the loan does not weigh you down.

Check, no matter whether you want to calculate the EMI manually using the formula or with the help of a smart EMI calculator such as CreditMitra:

• EMI amount
• Total interest cost
• Total repayment
• Tenure impact

It is always easier to pay the loan that was planned correctly, and with the help of the proper tools, it is possible to make the correct choice in several seconds.