How To Calculate Your Loan Emi: A Step-By-Step Guide


When considering a personal loan, one of the most crucial aspects to understand is the Equated Monthly instalment (EMI) you’ll be required to pay. The EMI is the fixed amount you’ll need to repay every month until the loan is fully paid off. It comprises both the principal amount and the interest. In this step-by-step guide, we’ll walk you through the process of calculating your loan EMI, with a focus on personal loans for salaried individuals.

Step 1: Gather the Necessary Information

Before you begin, make sure you have the following information:

  1. Loan Amount (Principal): This is the total amount you’re borrowing from the lender.
  2. Interest Rate: The rate at which the lender is providing you the loan.
  3. Loan Tenure: The period for which you’re availing the loan.

Step 2: Understand The Formula For Emi Calculation

The formula for calculating EMI is as follows:



  • P is the principal loan amount.
  • r is the monthly interest rate (annual interest rate divided by 12).
  • n is the total number of monthly instalments.

Step 3: Convert Annual Interest Rate To Monthly Interest Rate

Divide the annual interest rate by 12 to get the monthly interest rate. For example, if the annual interest rate is 10%, the monthly interest rate would be 0.1/12 = 0.00833.

Step 4: Calculate The Total Number Of Instalments

Multiply the number of years of the loan tenure by 12 to get the total number of monthly instalments. For example, for a 3-year loan, the total number of instalments would be 3 x 12 = 36.

Step 5: Plug In The Values And Calculate

Using the values gathered in Step 1, plug them into the EMI formula:


Let’s say you’re availing a personal loan of Rs. 1 lakh at an annual interest rate of 12% for a tenure of 2 years.

  • Principal (P) = Rs. 1,00,000
  • Annual Interest Rate = 12% or 0.12
  • Monthly Interest Rate (r) = 0.12 / 12 = 0.01
  • Tenure (n) = 2 years or 24 months

Substituting these values into the formula:


After calculating this, you will find the EMI amount.

Step 6: Review Your EMI

Once you’ve calculated your EMI, review the amount to ensure it fits comfortably within your monthly budget. If the EMI is too high, you may want to consider extending the tenure to lower the monthly instalment.

Using a Personal Loan Calculator

To simplify the process, you can use an online personal loan calculator. These tools are readily available on financial websites and are designed to provide quick and accurate EMI calculations. All you need to do is enter the loan amount, interest rate, and tenure, and the calculator will provide you with the monthly EMI.

Conclusion: Empowering Borrowers With Knowledge

Understanding how to calculate your loan EMI is an essential part of responsible borrowing. It enables you to plan your finances effectively and ensures that you’re comfortable with the monthly repayment amount. By following this step-by-step guide and utilizing online tools like personal loan calculators, you can navigate the world of personal loans for salaried individuals with confidence and make informed financial decisions. Remember, it’s always advisable to consult with financial advisors or experts before making significant financial commitments.