How the EMI calculator works
An EMI (equated monthly instalment) is a fixed amount you pay every month until the loan is cleared. Each payment has two parts: interest on what you still owe, and a slice of the original amount (the principal). In the early months most of your payment is interest. As the balance falls, more of each payment goes to principal.
The formula is EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where P is the loan amount, r is the monthly rate (yearly rate ÷ 12 ÷ 100) and n is the number of months.
Three ways to pay less
- Shorten the period. A shorter loan has a higher EMI but far less total interest.
- Pay a little extra. Even a small extra amount every month cuts months off the loan. Try it in the extra payment box.
- Compare offers by total cost. Look at the total you will repay, including fees, not only the monthly figure.
Frequently asked questions
How is EMI calculated?
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of monthly payments.
What is the difference between reducing-balance and flat rate?
On a reducing balance the interest is charged only on the amount you still owe, so it falls as you repay. A flat rate charges interest on the full original amount for the whole period, which costs more for the same quoted percentage.
Does paying extra each month help?
Yes. Extra money goes straight to the principal, so you owe less next month and pay less interest overall. Use the extra payment box to see exactly how many months and how much interest you save.
Can I use this for Islamic financing such as Diminishing Musharaka or Murabaha?
You can use it to compare the monthly amount if you enter the bank’s quoted profit rate, but the structure and calculation method can differ. Always use the schedule your bank gives you.