How to Calculate EMI for Personal Loan: A Simple and Effective Guide

Personal loans have proven to be invaluable during times of financial uncertainty. They serve as versatile financial instruments that can be utilised for a wide range of purposes, such as financing memorable family getaways, handling unforeseen medical expenses, or managing existing debt obligations. However, it is imperative to approach personal loans with caution because they are often double-edged and require careful consideration. To ensure a smooth experience, adequate preparation is paramount. A key aspect of personal finance and debt management involves accurately calculating the Equated Monthly Instalment (EMI).

Today, we are presenting a straightforward and effective guide to computing personal loan EMIs, offering a comprehensive explanation of the formula using a practical example.

Why is financial planning an important aspect of home loan repayment?

Financial planning is the process of evaluating an individual’s or organisation’s current financial situation, setting financial goals, and creating a strategic plan to achieve those goals. It involves analysing various aspects of finances, such as income, expenses, savings, investments, debt, insurance, taxes, retirement planning, and estate planning.

The purpose of financial planning is to provide a roadmap for managing finances effectively, optimising resources, reducing financial risks, and working towards long-term financial security and prosperity. By creating a comprehensive financial plan, individuals and organisations can make informed decisions, track progress, and adjust strategies as needed to ensure financial well-being.

Understanding the EMI Calculation Formula

The EMI for a personal loan is calculated using a formula that takes into account the principal amount, the rate of interest, and the loan tenure. The formula to calculate EMI is as follows: 

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

Where: EMI is the Equated Monthly Instalment P is the principal loan amount R is the rate of interest per month (rate of interest divided by 12) N is the loan tenure in months

Step-by-Step Guide to Calculating EMI for a Personal Loan

Now, let’s walk through the steps involved in calculating the EMI for a personal loan using the formula mentioned above.

Step 1:

Gather the necessary information Before you start calculating the EMI, you’ll need to gather the following information: 

Principal loan amount: The total amount you borrowed. 

Rate of interest: The interest rate charged by the lender per annum. 

Loan tenure: The duration of the loan in months. 

For example, let’s consider a personal loan of 50,000 with an interest rate of 10% per annum and a loan tenure of 36 months. 

Step 2:  

To convert the rate of interest to a monthly value to calculate the EMI, to convert the annual interest rate to a monthly rate by dividing it by 12.  In this case, the monthly interest rate would be 10% divided by 12, which is 0.00833. 

Step 3:

Calculate the EMI using the formula. Now, plug in the values into the EMI formula mentioned earlier:  

EMI = (50000 x 0.00833 x (1+0.00833)^36) / ((1+0.00833)^36-1) 

Calculating this equation will give you the EMI for the personal loan.  

In our example, the EMI would be approximately 1,592.39. 

Step 4

Understand the components of EMI, namely, the principal and interest.  

In the initial months of the loan tenure, a larger portion of the EMI goes towards paying off the interest, while the principal repayment gradually increases over time.

Benefits of Using an EMI Calculator

Calculating the EMI manually using the formula mentioned above can be a time-consuming process. To simplify the calculation and obtain accurate results, it is recommended to use an online EMI calculator. Several financial institutions and websites offer EMI calculators that require you to input the principal amount, interest rate, and loan tenure, and they will instantly provide you with the EMI amount. 

Using an EMI calculator provides several benefits, including:

  • Quick and accurate results: EMI calculators provide instant and accurate results, saving you time and effort. 
  • Easy comparison: You can compare different loan options by varying the loan amount, interest rate, and tenure to find the most suitable option. 
  • Financial planning: EMI calculators help you plan your monthly budget by giving you a clear understanding of the EMI amount. 
  • Flexible adjustments: You can adjust the loan tenure or principal amount in the EMI calculator to determine the impact on the EMI. 

EMI repayments are challenging financial commitments to uphold. However, nowadays, you can pay your EMIs using your credit card as well.


Calculating the EMI for a personal loan is an essential step to understanding the financial commitment you will be undertaking. By using the EMI calculation formula or an online EMI calculator, you can determine the monthly instalment and plan your finances accordingly. Remember to consider factors like the interest rate, loan tenure, and principal amount while calculating the EMI. This will enable you to make an informed decision and choose a personal loan that suits your financial needs and repayment capabilities.

Finnable provides an effective personal loan EMI calculator to empower you with the financial knowledge you require to make informed decisions.

Amit Arora


I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.
Finnable Logo