Q.Find the EMI for a personal loan of ₹1,20,000, taken at 12% per annum, to be repaid over 12 monthly instalments.

First convert the annual rate to a monthly rate, then apply the EMI formula directly.

$(1.01)^{12}=1.126825$.

$\text{EMI}=\dfrac{1{,}20{,}000\times0.01\times1.126825}{0.126825}=\dfrac{1{,}352.19}{0.126825}\approx10{,}661.85$

Here the loan amount $P=₹1{,}20{,}000$, the annual rate is $12\%$, and the tenure is $n=12$ months.

Step 1 — Convert the annual rate to a monthly rate.

Step 2 — Compute $(1+r)^n$.

Step 3 — Apply the EMI formula.

Step 4 — Evaluate.

Using the annual rate $r=0.12$ directly in the formula, instead of first converting it to the monthly rate $r=0.01$, is the single most common EMI error — since $n$ counts monthly instalments, the rate used inside the formula must also be a monthly rate, matching the same period.