The formula for calculating EMI is [P x R x (1+R)^N]/[(1+R)^N-1]
Here P is the loan amount or Principal and R is the rate of interest per month. [Here is how you can calculate rate per month – if the rate of interest per annum is 11%, the per month rate would be 11/(12 x 100)], and N is the number of instalments.
Here is an example to help you understand how exactly an EMI is calculated:
Let the loan amount be Rs. 5,00,000, rate of interest be 10%, and tenure duration be 10 years (or 120 months). Comparing with the formula we have:
P= 5,00,000, R= 10/(12X100)= 0.0083, and N= 120
So, EMI = [5,00,000 X 0.0083 X(1+0.0083)120]/[(1+0.0083)120-1]
EMI= [5,00,000 X 0.0083 X 2.696] /
EMI= Rs. 4184.14