What is an EMI?

A loan is a financial agreement between two parties, a lender and a borrower. Under this agreement, the lender gives a specific amount of money to the borrower with the intent that the amount borrowed is paid back with interest as monthly installments over a predetermined period of time by the borrower. Using an EMI calculator is the easiest way to determine your monthly payouts and balance your budget accordingly. Everyone has to borrow a loan at some point in time in their life whether for buying a car or a house, funding their child's education or consolidating debts, etc. Thus, loans have become an important part of everyone's life in today's times. Loans can be availed for various purposes, but the key components on loans are always the same, namely - loan amount, loan tenure and interest rates.

What is a Loan EMI Calculator?

EMI is the payment which the borrower makes every month towards loan repayment of the loan. EMI constitutes the principal amount along with the accrued interest. You can use the EMI calculator to calculate your monthly loan EMI payouts. The borrower just needs to enter the variables of the loan such as the principal amount, tenure and interest rate and it instantly fetches an result which is the EMI. Calculating EMI using the online EMI calculator is easy and you get to know your loan EMI in seconds. RG Loan's online loan EMI calculators are available 24*7 without any cost! So calculate or compare various loan EMIs any number of times you wish to, for free.

Whenever we talk about loans, one of the first thing that crosses the mind is EMI. The abbreviation, EMI stands for Equated Monthly Installment. An equated monthly installment (EMI) is the amount that a loan borrower pays every month in order to repay the money borrowed. There is a particular date each calendar month by which the EMI should be paid by the borrower. The loan amount plus the accrued interest is divided equally over a period which is the loan tenure and you can easily calculate this final amount using an EMI calculator. The number of equated monthly installments is equal to the number of months in the loan repayment tenure.

EMIs are beneficial as you can pay the borrowed amount back in parts and reduces the financial pressure on the borrower. The EMI style is preferable as it is not easy for everyone to pay back a lump sum amount of money all at once especially in case of large amount such as home loans. Therefore, EMIs are an added advantage as you can pay little over the loan tenure and repay the amount borrowed in full. EMIs gives a broader section of society the option to realize their dreams of affording expensive things, such as a house, car, etc., that they won't be able to buy if they needed to make payments all at once. Using an EMI calculator, you can easily figure out your loan repayment requirement and plan your monthly budget accordingly. You have the flexibility to decide the amount that you are comfortable to pay off monthly and the duration for which you wish to make the payments depending upon your income and financial stability.

EMI payments contribute towards the loan amount and accrued interest on the loan amount. The initial EMI payments contribute more towards the interest component of the loan and this procedure is termed as front loading. In the later stages of the loan tenure, the major contribution of the EMI goes towards repayment of the loan principal.
Commonly, EMIs are fixed and the borrower has to pay fixed monthly installments to satisfy the loan amount. But, the loan EMIs can vary in the case of floating interest rate loans and prepayments. The amount of your monthly EMI depends on certain factors pertaining to your loan. You can calculate the EMI applicable to your loan using the formula for calculating EMI. Calculating EMIs using the formula is not an easy task and involves complicated calculations. Rather, opting for an EMI calculator is a better choice as it determines EMIs within seconds of your input.

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How are Loan EMIs Calculated?

Loan amount, tenure and interest rate are the three key parameters of a loan and these vary in case of different loan providers. EMI applicable to a loan varies according to all these three parameters. Therefore, before choosing a particular loan, it is very important to have an understanding of these three parameters and how do they relate to the loan EMI. An EMI, or equated monthly installment, is the amount that is payable by you every month to the lender in order to satisfy the principal and the accumulated interest. You can calculate EMI for loans in the following three ways:

Calculate Your EMI Using Mathematical Formula


EMI = [P x R x (1+R)^N]/[(1+R)^ (N-1)],
In this formula the variables stand for:
EMI is the equated monthly installment
P is the principal or the amount that is borrowed as a loan
R is the rate of interest that is levied on the loan amount (the interest rate should be a monthly rate)
N is the tenure of repayment of the loan or the number of monthly installments that you will pay (tenure should be in months)
This is the same formula an EMI calculator uses to provide you with the correct EMI payable within seconds.

Let us consider an example to understand EMI calculations in a better way,
For instance, you have taken a personal loan of Rs. 2 lakhs for 2 years at an interest of 20 % p.a.
Firstly, we need to convert the annual interest rate into a monthly rate and the tenure into months.
To calculate the monthly interest rate, we divide the annual interest rate by the number of months in a year, i.e. 12, so monthly 20/12 = 1.66% per month
The 2-year loan tenure must also be converted into months before integrating into the formula i.e. 24 months

Now we have the three variables with us which we can integrate into the formula as follows:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
EMI= [2,00,000 x 1.66/100 x (1+1.66/100) ^ 24 / [(1+1.66/100) ^ 24 - 1)
EMI= Rs. 10, 179

The EMI calculator formula is universal and can be applied to different loans. The variation in EMI value occurs according to the three key variables, i.e. the loan amount, the loan tenure and the interest rate. The EMI payment is directly proportional to the loan amount and interest rates, which implies that with increase in amount and interest rate, the EMI on the loan also increases. However, the EMI is inversely proportional to the tenure of loan, which means that though the amount of paid interest increases with longer tenures, but the EMI payments decrease if the loan is repaid over a longer time period.

EMI Calculator FAQs


  • Q. How can I make the best choice when using an EMI calculator?
    • Ans. EMI calculator is a very handy tool as it not only determines the loan EMI but also tabulates a list of best loan offers on the basis of your eligibility and loan requirements. You can compare EMIs for different loans using the EMI calculator. You can compare the tabulated list of loans against set parameters and make an informed choice.

  • Q. Can I use same EMI calculator for home, car and personal loans?
    • Ans. Usually, the home loan EMI calculator, car loan EMI calculator and personal loan EMI calculator work based on the same three parameters. These parameters include loan amount, loan tenure, and interest rate. The main difference between the calculators is the maximum principal amount that is allowed as input, this restriction leads one to choose the EMI calculator based on the type of loan.

  • Q. Do EMI calculators give more accurate results than excel sheets?
    • Ans. Accurate results can be obtained from both excel sheets and the online EMI calculator. The only major difference being that online calculators save you from the hassles of lengthy and tedious calculations and tabulate your EMI within seconds. Whereas using an excel sheet calculator, you may have to put in more time and effort. For this reason, online calculators have become the most preferred choice.

  • Q. What is loan amortization schedule?
    • Ans. In the context of a loan, amortization is a systematic arrangement table of the loan payment process. The equated monthly installments made towards loan repayment go towards paying off the principal as well as interest accrued. Loan amortization table gives you a clear idea about the amounts paid towards these two components over the loan tenure. Therefore, understanding the amortization schedule is very important to get a better picture about how your loan is repaid.

  • Q. Is the EMI calculated by the EMI calculator the same as the actual bank EMI?
    • Ans. EMI calculated by the EMI calculator tool is based upon your inputs. When it comes to the Bank EMI, there might be slight changes in the loan amount, loan tenure, interest rate and processing fees for the loan. If the bank does not approve the exact loan amount for the tenure and the interest rate you used as input, the EMI that you will have to pay may differ slightly from the EMI that you had calculated using the EMI calculator tool.