IndiaLends Advisory

By IndiaLends Advisory

Sep 10, 2018

How is an EMI calculated?

As the cost of living is increasing day by day, loans or other forms of credit has now become part of our livelihood. However, EMI is the foremost factor that is considered when deciding on a loan.

In here, find the meaning, the factors affecting your EMI and the different ways to calculate it.

What is an EMI?

As the EMI full form states, EMI is the Equated Monthly Installments made by the borrower to the lender at a fixed date on each month. It mainly consists of

→ Principal – The actual amount borrowed from the lender
→ Interest – The charge borne by the borrower for taking the loan

Trending Article: 10 Best Personal Loans in India [Updated 2018]

Factors to Calculate EMI

The following factors are considered when computing the EMI of a loan or any form of credit:

→ Loan Amount

→ Interest Rate

→ Tenure of the loan

Loan Amount: As the name suggests, the loan amount is the total amount that the borrower needs. At times, your EMI is not calculated on the total amount borrowed but on the loan amount sanctioned. For example, if you need a loan of ₹4 lakhs but are eligible for ₹3.25 lakhs, then your EMI is calculated on the latter amount.

Interest Rate: The interest rate on your loan is determined by the lender depending on your credit score, credit history, monthly income and more. The interest rate has an inverse relationship with your credit score. The higher the credit score, the lower the interest rate and vice versa.

Tenure of the loan: You loan tenure is the actual number of EMI’s you will pay for repayment of your loan. In other words, it is the entire period for which you have borrowed the loan. The tenure of the loan has an inverse relationship with the EMI’s. The longer your tenure, the lower your EMI’s.

How to calculate EMI?

You can calculate your EMI in the following ways:

→ The Excel function

→ Using the traditional formula

→ Loan calculator online

Using Excel

One of the easiest ways to calculate EMI is using the Excel spreadsheet. The Excel function to calculate EMI is PMT. For this, you need the following three variables:

⇒ Rate of interest or rate

⇒ Number of months/periods or nper

⇒ Value of the loan or pv

The Excel formula to calculate EMI is

EMI = PMT(rate,nper,nv)

For example, if Rakesh is taking a personal loan of ₹3 lakhs at an interest rate of 12% for a period of four years, the EMI is calculated as follows:

EMI= PMT(0.12/12, 4*12, 4,00,000) or ₹10,533.33

*the interest rate is calculated on a monthly basis, hence, the rate is divided by 12.

Using The Traditional Formula

All the calculations are based on the traditional formula. You can calculate EMI using an electronic calculator or use the formula given below:


EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

where P stands for the loan amount or Principal, R stands for the rate of interest and N is the number of the monthly instalments.

The answer to both the calculations is the same.

Using an EMI Calculator Online

Another way of calculating your EMI is using the EMI calculator. You can simply enter the values required and calculate in no time! In fact, some personal loan EMI calculator can help you calculate the total interest payable and the total amount you will be liable to pay.


Use IndiaLends personal loan EMI calculator!



The benefits of using a personal loan calculator online are given below:

→ An EMI calculator can help you save from a lot of hassles of using pen-paper and reduce manual efforts.

→ With the help of an EMI calculator, you can eliminate mistakes and therefore give accurate results.

→ When you calculate EMI’s online, you can easily compare the terms of service offered by different lenders with ease.

Tips to Make EMI Payments On-Time

Now that you know the ways to calculate your EMI, here are a few tips and tricks to make your payments on-time:

Plan, plan, and plan

The best way to manage your finances is by planning. In other words, create a budget and try your best to stick to it. A budget will help you avoid overspending. You can also note down all your monthly expenses and make a budget accordingly.

Set-up EMI alerts

If you are a person who tends to forget a due date, it is best to set up alerts. This will not only help you remind you to make the payments on-time but avoid any effect on your credit score.

You might want to read: Factors That Decide Your Credit Score Explained


→ Track your expenses

As mentioned above, track your expenses. Note down all your living expenses and separate the expenses made in cash and online. You can also use a spends analyzer to monitor your spendings.

IndiaLends is an online lending platform that helps you manage your finances effectively. From providing credit products such as personal loans, credit cards, and free credit score, we also help in providing personalized insights on your credit profile.

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