Methods of Calculation of EMI or Instalment

When you take a loan, the bank doesn't just expect you to return the principal — it wants the interest too, spread evenly across your repayment period. The Equated Monthly Instalment (EMI) is that fixed amount you pay each month, designed so that every instalment covers the interest due on the outstanding balance and gradually pays off the principal. The core idea is that the present value of all future EMIs, discounted at the loan's interest rate, must exactly equal the loan amount you receive today. This section shows you the two st …