How the monthly payment is calculated
This uses the standard formula for a loan repaid in equal monthly payments, where interest is charged on the balance still owed. It's often called an EMI, or equated monthly instalment.
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1)
P is the loan amount, r is the yearly rate divided by 12 (as a decimal), and n is the number of monthly payments. Early payments are mostly interest. As the balance falls, more of each payment goes to the loan itself, which you can see in the chart.
Your lender's figure can differ slightly if they charge fees, round differently, or quote a “flat” rate instead of a reducing-balance rate. Treat this as a close estimate and check the exact figure in your loan offer.
Questions people ask
What does EMI mean?
Equated monthly instalment: the same payment every month for the life of the loan, covering both interest and part of the amount borrowed.
Why is my bank's figure slightly different?
Banks may add processing fees or insurance, round each month's interest, or use a different day count. This calculator shows the standard formula with no fees.
What's the difference between a flat rate and a reducing rate?
A reducing rate charges interest only on what you still owe, and that's what this calculator uses. A flat rate charges interest on the original amount for the whole term, so the same quoted number costs you much more.
Does paying extra early save money?
Usually yes, because it lowers the balance that interest is charged on. Check your loan terms for prepayment fees first.