How to Calculate EMI for loans

EMI or equated monthly installments is the most popular form of loan payment, equated monthly installment(EMI) refers to the monthly payments towards interest and principal made by a borrower to a lender.EMI is calculated using a formula that considers loan amount,interest rate and loan period as variables.

Following is the formula to calculate EMI:

EMI = ( L*I ) * [ (1+I)^N / [(1+I)^N]-1 ]
Where
L = loan amount
I = interest Rate(rate per annum devided by 12)
^ = to the power of
N = Loan Period in months(years multiplied by 12)

Assuming a loan of Rs. 1 lakh at 11% per annum, repayable in 15 years, the EMI using the formula will be:

EMI = (100000*0.00916)* {(1+0.00916)^180 / [(1+0.00916)^180]-1}

= 916 * (5.161846 / 4.161846)

EMI = Rs. 1,136