Taking a bike loan, mobile installment plan, or personal loan? The bank quotes you a monthly EMI (Equated Monthly Installment) — but knowing how it's calculated helps you compare offers and spot expensive ones.
What is EMI?
EMI is the fixed amount you pay every month until the loan is fully repaid. Each payment covers part interest, part principal. Early payments are mostly interest; later ones mostly principal.
The EMI formula
EMI = P × r × (1+r)n / ((1+r)n − 1)
- P = loan amount (principal)
- r = monthly interest rate (annual rate ÷ 12 ÷ 100)
- n = number of monthly payments
Worked example
Bike loan of Rs 300,000 at 18% annual for 3 years (36 months):
- Monthly rate r = 18 ÷ 12 ÷ 100 = 0.015
- EMI = 300,000 × 0.015 × (1.015)36 / ((1.015)36 − 1) ≈ Rs 10,847/month
- Total paid ≈ Rs 390,500 — so the loan costs you about Rs 90,500 in interest.
3 tips before you sign
- Compare the total cost, not just the EMI. A longer tenure lowers EMI but raises total interest.
- Ask about processing fees and insurance — they add to the real cost.
- Keep total EMIs under 40% of monthly income to stay comfortable.
Skip the math — use the free calculator
Try our free Loan / EMI Calculator: enter amount, rate and years to see your EMI, total interest and total payable instantly — no sign-up needed.