How to use the loan calculator
- Enter the loan amount — the amount you borrow, after any down payment.
- Enter the annual interest rate quoted by the bank or lender.
- Enter the loan term in years or months.
- Read your monthly payment (EMI), the total interest you will pay over the life of the loan, and the yearly or monthly repayment schedule.
The calculator works in any currency — taka, dollars, rupees or pounds — because the maths is the same.
What is an EMI?
EMI stands for Equated Monthly Instalment: a fixed amount you pay every month until the loan is repaid. Each payment covers that month’s interest first, and the rest reduces the amount you owe (the principal). Because the balance shrinks over time, the interest portion falls and the principal portion grows with every payment — even though the total payment stays the same. This is called an amortizing loan, and it is how most home loans, car loans and personal loans work.
The EMI formula
EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
- P = loan amount (principal)
- r = monthly interest rate = annual rate ÷ 12 ÷ 100
- n = number of monthly payments
Example: 500,000 at 9.5% for 5 years. r = 9.5 ÷ 12 ÷ 100 = 0.0079167 and n = 60. The EMI is about 10,501 per month, and the total interest over five years is about 130,056.
How the term changes what you pay
A longer term lowers the monthly payment but increases the total interest, because you owe money for longer. For a 500,000 loan at 9.5%:
| Term | Monthly EMI | Total interest |
|---|---|---|
| 3 years | ≈ 16,016 | ≈ 76,590 |
| 5 years | ≈ 10,501 | ≈ 130,056 |
| 10 years | ≈ 6,470 | ≈ 276,385 |
Choosing the shortest term you can comfortably afford usually saves the most money.
Ways to pay less interest
- Make a larger down payment so you borrow less.
- Prepay when you can. Extra payments go straight to the principal, which reduces every future interest charge. Check whether your lender charges a prepayment fee.
- Compare the effective rate, not just the advertised rate. Processing fees, insurance and other charges add to the true cost of borrowing. In many countries lenders must show an APR (annual percentage rate) that includes fees.
- Watch out for “flat rate” offers. A flat rate charges interest on the full original amount for the whole term. A 10% flat rate costs roughly as much as an 18% reducing-balance rate. This calculator uses the standard reducing-balance method.
Affordability rule of thumb
Many lenders and financial planners suggest keeping total monthly debt payments below about 35–40% of your take-home income, and housing costs below about 30%. Use the calculator to test different amounts and terms before you apply.
Frequently asked questions
How is EMI calculated?
EMI = P × r × (1+r)^n ÷ ((1+r)^n − 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of months.
Does this calculator include fees and insurance?
No. It calculates principal and interest only. Add processing fees, insurance and taxes separately to estimate the full cost.
What is the difference between flat and reducing interest rates?
A flat rate charges interest on the original loan amount for the whole term. A reducing (diminishing) balance rate charges interest only on what you still owe, so it is cheaper at the same headline rate. This calculator uses reducing balance.
Can I use it for a home loan or mortgage?
Yes. It works for any fixed-rate amortizing loan, including home loans, car loans and personal loans. For variable-rate loans, the result is an estimate at today’s rate.
Why is most of my early payment interest?
Interest is charged on the outstanding balance, which is highest at the start. As you repay, the interest part shrinks and more of each payment reduces the principal.