What is an EMI?
EMI stands for equated monthly installment: a fixed payment you make every month until a loan is fully repaid. It is the standard way personal loans, auto loans, many student loans and consumer financing plans are structured. Each EMI covers that month's interest first, with the remainder reducing your principal balance.
The EMI formula
The calculator uses EMI = P × r × (1 + r)n / ((1 + r)n − 1), where P is the amount borrowed, r is the monthly interest rate (annual rate divided by 12, as a decimal) and n is the number of months. For example, borrowing $25,000 at 8% for 60 months gives a payment of about $506.91 and roughly $5,415 in total interest.
If the rate is 0%, as with some promotional financing, the payment is simply the loan amount divided by the number of months.
How to lower your loan cost
- Shorten the term. Fewer months means a higher payment but much less interest.
- Improve your rate. A better credit score, a co-signer, or shopping multiple lenders can lower the APR.
- Borrow less. A bigger down payment on a car, for example, reduces both the payment and the interest.
- Prepay when allowed. Extra payments go straight to principal on most simple-interest loans. Check for prepayment penalties first.
APR vs. interest rate
The advertised APR may include origination fees, so it can be higher than the note rate. For the most realistic comparison between lenders, enter the APR here and compare the total repaid. Fees deducted from the loan amount effectively raise your cost, so a loan with a lower rate but large fees can be more expensive overall.
This tool gives estimates for planning; your lender's disclosure is the final word on your payment.
Frequently asked questions
Does the EMI change over the loan?
For a fixed-rate loan the EMI stays the same. The interest portion shrinks and the principal portion grows each month.
Can I use this for car loans?
Yes. Enter the amount financed after your down payment and trade-in, the APR and the term in months.
What happens if I pay extra?
On most simple-interest loans extra payments reduce principal, lowering total interest and ending the loan sooner.