All You Need To Know About An EMI Calculator

India’s finance market is continuously expanding. Whether it’s for a house, a personal loan, or a business loan, it always helps us overcome a financial roadblock on the route to our aspirations and goals. One of the most reasonable and popular loan repayment methods is EMIs, which the borrower should factor into their present and future financial planning. There are various loan EMI calculators accessible online; one must select an effective EMI calculator and understand how to use it to determine the precise monthly amount owed towards a loan.

What is EMI?

Equated Monthly Instalments, or EMIs, are the monthly payments made to financial institutions and banks until the debt is entirely paid off. They include loan interest as well as a fraction of the principal owed to the financial institution. In order to calculate the amount, divide the loan period, or the amount of time it must be repaid, by the interest and principal. This sum should be paid monthly. In an EMI, the interest component would be greater at the beginning and decrease with each future payment. The actual percentage allocated to principal repayment depends on the rate of interest. Your monthly EMI payment will consist of equal portions of principal and interest, but the percentages of principal and interest will change over time, resulting in less interest and more principal.


The EMI for a fixed interest rate loan remains constant for the whole loan term, provided there is no default or part-payment in between. If a borrower makes an advance payment during the tenure of an ongoing loan, either the succeeding EMIs or the initial loan tenure is decreased, or a combination of the two. When a borrower fails to pay an EMI during the loan’s duration (EMI holiday, cheque dishonour/bounce, inadequate balance in event of auto deduction of EMI, or a default), either the succeeding EMIs or the loan’s tenure increase, or a combination of both, in addition to attracting a monetary penalty, if applicable. Similarly, if the interest rate declines over the loan’s lifetime (as in the case of variable rate loans), the following EMIs fall or the loan’s tenure falls, or a combination of the two. When interest rates rise, the opposite occurs.

How can it be useful for small businesses?

Small businesses on a limited budget that wish to fund expensive acquisitions like equipment, plant, machinery, and other items but don’t have the liquidity to pay for them upfront might use the payback approach of EMI. 


How is EMI Calculated?


The formula for calculating EMI is as follows:

EMI= [PR(R+1)] [(R+1)N-1]


P is the Principal Loan Amount

R is the Monthly Interest Rate 

{Note: As R is the Monthly Interest Rate, so if the annual interest rate is given, then R would be equal to [(Annual Interest Rate) 100] ÷ 12}

N is the Loan’s Term OR the Tenure OR the Duration in months


The formula for EMI calculation is the same for any kind of loan taken, whether it is a personal loan or a business loan.

Business Loan Calculator

When calculating EMI before applying for a loan, the Business Loan EMI Calculator comes in handy. You can determine your business loan EMI by entering essential loan information, such as loan amount, payback term, and interest rate into the business loan EMI calculator. The Equated Monthly Instalment (EMI) is computed automatically by the lender or financial institution based on the information provided.

What are the benefits of using a Loan EMI calculator?

  • Regardless of the sort of loan you intend to take, whether it’s a secured or unsecured loan, you need to know how much you’ll have to pay each month before you apply. An EMI calculator in India might be useful in this situation.
  • It assists you in obtaining an exact estimate of your EMI amount so that you may budget properly. To increase your chances of getting a loan, make sure your debt-to-income proportion is less than 50%.
  • You may save time by using a loan EMI calculator. You don’t have to conduct the complicated calculations by yourself on paper, which might take a long time.
  • It removes the possibility of a computation error, giving you a precise estimate every time.


Let’s take a look at an example-

Suppose you are an emerging small-scale business, and you file for a 50 lakh home loan with Axis bank to invest in your business needs. Your company was able to fulfil all the qualifying requirements and was authorised a business loan for a 5-year term. Everything seems great to you and you think that you would easily be able to pay back the amount.


However, you later find out that EMI would cost you Rs 1,08,712 per month. Now you are concerned as your business is small-scale and just emerging in the market; it would be very difficult for you to manage to pay this amount back to the bank.


If you had used the EMI calculator beforehand, you would have known exactly what your EMI would be and you could have budgeted appropriately.

Factors Influencing Your Loan EMI

  • Principal Amount: 
    • The principal amount is the amount you desire to borrow from a lender. This amount has a direct impact on your EMIs. This implies that if you apply for a lesser principal loan amount, the EMI charged will be lower than if you request for a bigger loan amount, and vice versa.
  • Rate of Interest:
    • This is the interest rate at which a lender will offer/approve a loan. This is proportionate to the amount of EMIs you pay on your loan.
  • Tenure Period:
    • The loan’s term is the amount of time within which you have to repay it. The situation is different here, and your EMIs are inversely proportional to your tenure. A shorter-term raises your EMI amount, while a longer-term lowers your EMI amount, making it more affordable for you.


After reading this exhaustive article about Loan EMI Calculator, you would have gathered a fair idea about what EMI is and how you can use the EMI calculator to plan appropriately. If you have a small-scale business, getting a Business Loan using EMI Calculator is a simple process that can be accomplished by doing correct calculations and selecting an appropriate duration and loan amount. It is generally wise to evaluate your loan EMI prior to applying for any loan so that you are fully informed of the monthly instalments you would pay.


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