How do I calculate EMI with a simple example?

Short answer
EMI is calculated using the loan amount, interest rate, and tenure. Let’s understand it with a straightforward example.

Step 1: Know the basic details

Assume you take a personal loan of ₹1,00,000
The interest rate is 12% per year
Loan tenure is 1 year

Step 2: Convert values

Interest is charged monthly, so convert the annual rate to a monthly rate.
12% per year is equivalent to 1% per month.
A tenure of 1 year equals 12 months.

Step 3: Understand the logic

Every EMI has two parts.
One part repays the loan amount.
The other part is the interest charged by the bank.

In the first few EMIs, the interest portion is higher. Slowly, the principal portion increases. Loan dheere dheere reduce hota hai.

Step 4: Calculate approximate EMI

Using EMI calculation logic, the EMI for this loan is approximately ₹8,885 per month.

Over 12 months, you will pay:
₹8,885 × 12 = ₹1,06,620

So total interest paid is roughly ₹6,620.

Simple way to remember

Higher loan amount = higher EMI
Higher interest rate = higher EMI
Longer tenure = lower EMI but more total interest

Final takeaway

EMI calculation appears complex, but the underlying principle is simple. You are repaying the loan incrementally, with interest accruing. Agar numbers samajh aa gaye, loan planning easy ho jaati hai. For exact results, EMI calculators help, but basics samajhna zaroori hai.