How to Calculate EMI?

What is emi and how is emi (Equated Monthly Installment ) calculated?

Equated Monthly Installment Calculation

EMI stands for Equated Monthly Installment. It is a fixed payment made by the buyer to the lender at the specified date for the fixed time period. The full amount should be paid off along with the fixed interest rate within the due time. EMI can be calculated for the car loan, home loan or any other personal loans. To know how to calculate EMI proceed with the steps given below.

Formula for EMI Calculation
Here is the formula to calculate EMI value.
EMI = ( P × r × (1+r)ⁿ ) / ((1+r)ⁿ − 1)
where,
P = Loan amount - Down payment.
r = Annual Internet rate / 1200
n = Term (Period)

Step 1: Let us consider an example to calculate the EMI value.
Assume, Amy got a scooter worth Rs. 60,000 at the interest rate of 10 percent per annum for the period of 5 months. She made the initial down payment of Rs. 10,000. Calculate the EMI value.
Loan amount of the scooter - 60,000Rs
Annual interest rate - 10%
Down payment - 10,000Rs
Period - 5 months.

Step 2: Find the principal amount.
p = Loan amount - Down payment
p = 60,000 - 10,000
p = Rs 50,000

Step 3: Find the Interest Rate.
Interest rate (r) = Annual Interest rate / 1200
r = 10/1200
r = 0.0083

Step 4: Substitute the obtained value in the formula.
EMI = ( P × r × (1+r)ⁿ ) / ((1+r)ⁿ − 1)
= (50,000 x 0.0083 x ( 1 + 0.0083)⁵ ) / ((1 + 0.0083)⁵ - 1)
= 415 x (1.00083)⁵ / ((1.0083)⁵ - 1)
= 415 x 1.0421 / 1.0421 - 1
= 432.47 / 0.0421
EMI = Rs. 10272.44

Use our simple online EMI calculator to calculate your EMI value

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