How to calculate the EMI on your loan

EMI = [P x R x (1+R)^N]/[(1+R)^ (N-1)],
In this formula the variables stand for: EMI is the equated monthly instalment
P is the principal or the amount that is borrowed as a loan
R is the rate of interest that is levied on the loan amount (the interest rate should be a monthly rate)
N is the tenure of repayment of the loan or the number of monthly installments that you will pay (tenure should be in months)

Let us consider an example to understand EMI calculations in a better way, For instance, you have taken a personal loan of Rs. 2 lakhs for 2 years at an interest of 20 % p.a.

To calculate the monthly interest rate, we divide the annual interest rate by the number of months in a year, i.e. 12, so monthly 20/12 = 1.66% per month

The 2-year loan tenure must also be converted into months before integrating into the formula i.e. 24 months

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
EMI= [2,00,000 x 1.66/100 x (1+1.66/100) ^ 24 / [(1+1.66/100) ^ 24 - 1)
EMI= Rs. 10, 179

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