EMI (Equated Monthly Instalment) is the fixed monthly amount you pay to repay a loan over its tenure. Each EMI covers both principal repayment and interest, and the same figure is debited every month until the loan closes. Anyone planning a home, car or personal loan uses it to check whether the monthly outgo fits their budget.
The formula. EMI = P × r × (1+r)^n ÷ [(1+r)^n − 1], where P = principal (amount borrowed), r = monthly interest rate (annual rate ÷ 12 ÷ 100), and n = total number of monthly instalments (years × 12).
Worked example. For a ₹25,00,000 home loan at 8.5% per year over 20 years, the monthly rate r ≈ 0.7083% and n = 240. The formula gives an EMI of about ₹21,700. Over the full tenure you repay roughly ₹52 lakh, of which about ₹27 lakh is interest — more than the amount originally borrowed.
In the early months a larger portion of your EMI goes toward interest. As the principal reduces, the interest component shrinks and more goes toward principal — this is called amortization.
Where it's used. EMIs are how most large purchases in India are paid for: home loans, car and two-wheeler loans, personal loans, and no-cost EMI offers on phones and appliances. Knowing the EMI and the total interest before borrowing reveals the true cost of a loan and how much a longer tenure really adds.