EMI Full Form – Meaning of EMI, How to Calculate EMI

Individuals can obtain financial assistance through loans from banks and non-banking financial entities and return the borrowed amount in EMIs. Regular payment of EMIs makes one a trustworthy borrower. Before you take a loan and start paying EMI, it is essential to learn all about EMIs! 

Meaning of EMI

EMI full form Equated Monthly Instalment, is the pre-fixed amount a borrower pays to repay a loan. Lenders calculate the instalments by dividing the duration and the total borrowed amount. You can easily calculate the amount via the free online personal loan EMI calculator tool.

Types of EMI

Below are the two types of EMIs you can pick from!

  • Fixed

The amount remains constant throughout the loan duration. The principal amount is focused on calculating the interest component in fixed EMI.

  • Floating

The final amount changes in the floating EMI full form Equated Monthly Instalment, depending on the change in interest rate. The interest component can be calculated by adding the principal amount to the current interest rate.

Factors Affecting Equated Monthly Instalment

The following factors can affect your EMI! 

  • Interest Rate

The final amount of the EMI full form Equated Monthly Instalment may fluctuate on the change in interest rate. The EMI amount may increase or decrease as per the change in the interest rate and can be quickly calculated via a personal loan EMI calculator.

  • Frequency of EMI Payments

Subjected to the loan contract, customer can pay their EMI weekly, quarterly, half-yearly or annually. Loan lender prefers to pay mostly every month to manage their finances.

  • EMI Prepayment

Some loan plans allow customers to partially or entirely prepay the remaining EMI full form Equated Monthly Instalment amount with no extra fees. However, some credit arrangements might impose a penalty on prepayment based on specific terms and conditions. Thus, it is essential to thoroughly read all the terms and conditions of certain agreements before applying for a loan.

  • Late EMI Payment

Late repayment penalty may be imposed on the customer in case of delay. Thus, it will increase the lending cost. Customers are advised to repay on the scheduled time in loan agreements to prevent such penalties.

Essential Components to Calculate EMI

There are mainly three components for calculating EMI full form Equated Monthly Instalment. 

  • Amount of Loan

The amount customer lends from the bank is called the loan amount. It entirely depends on the customer’s requirements. The bank or finance institute checks if the customer is creditworthy, and they provide the loan amount accordingly.

  • Tenure

The bank sets a maximum repayment tenure per the customer’s loan amount. The client can choose a whole repayment procedure or affordable EMIs. Note the lower the tenure, the higher the EMI cost, and vice versa.

  • Rate of Interest

Interest rate is not standard in each bank and may vary per the bank’s norms. The interest rate is the charged interest on the money lent by the customer. Customers should consider every fee, including pre-processing, processing, prepayment, repayment, and pre-closure fees, taken by the finance offices before finalising the loan. These are included in the final amount, along with the interest rate. These complex calculations can be done online via a personal loan EMI calculator.

Calculations of EMI

Equated Monthly Instalment calculation can be done by a formula given:

EMI full form Equated Monthly Instalment={P*R*(1+R)^N/(1+R)^N-1


P=Principal amount

R= Monthly interest rate 

Note: If calculated annually, it should be written as (annual rate of interest/12)

N= Tenure in months

An example of a personal loan EMI calculator is:

If a lender has borrowed a personal loan of INR 5 Lakhs for five years at an interest rate of 10% per annum. Using the EMI formulation, we can calculate this as:

P= INR 5,00,000 

R= 10%12


N= 5 years * 12 months

= 60 months

Now, EMI= {5,00,000*0.00833* (1+0.00833)60/{1+0.00833)60-1}

= INR 10,824

Thus, the lender has been provided with an EMI of INR 10,824 per month for five years of tenure to repay the bank loan.

Several online personal loan EMI calculators can quickly and easily solve a complex amount in minimum time.


EMI full form Equated Monthly Instalment is a key player in loan payments. Customers should calculate EMI accurately before applying for loans. Before finalising the loan arrangements, one should consider all the aspects of the agreements, including loan tenure, rate of interest, frequency of payment and so on. It will help customer manage their finances very well with zero stress. Several personal loan EMI calculator tools are free to reduce complex calculations’ timing.

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