This is how you calculate your Personal Loan EMIs! | Personal Loan Stories - Kotak Mahindra Bank
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10 AUGUST, 2021

Loans are financial instruments where you borrow a sum of money from a bank or NBFC in exchange for paying interest and repaying the principal amount within a time frame by Equated Monthly Installments (EMI), which is a monthly payment schedule given by the bank.

Personal loans are loans taken for personal use, such as a loan for marriage or travel or to purchase furniture and electronic equipment. Personal loans are approved easily, and even the loan amount is credited to your account on the same day. As these are collateral-free loans approved based on your financial history, these loans charge a higher rate of interest. With a higher interest rate, the EMI also shoots up as these EMI’s are determined on the amount of loan and the duration of repayment.

Many factors may affect the EMI, such as -

  1. Loan tenure - Longer the tenure, shorter the EMI, and vice versa.
  2. Rate of interest - Depending on many factors such as an individual's credit score, RBI rate for the market, eligibility, etc.
  3. Loan amount - Higher the loan amount, the higher will be the EMI.

There is a specific formula to calculate the same, which we will discuss below.

The formula to calculate an EMI is,

EMI = [P x R x (1+R) ^ N] / [(1+R) ^ (N-1)]


  • P = Principal amount (the base amount of the loan)
  • R = Rate of interest (the percentage of interest paid on the loan amount). It is divided by 12, which gives us the rate of interest every month.
  • N = Tenure of the loan (in months)


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This formula can be a bit tricky when you do it manually. Instead, you can use other forms of calculation such as MS excel sheets where -

- In the cellblock, type = PMT (RATE,NPER,PV,FV,TYPE)

- Where

  1. RATE is the interest percentage,
  2. NPER is the number of years on loan repayment x 12 months, i.e., if you want to repay your loan in 5 years, multiply 5 by 12.
  3. PV is the principal amount of the loan.
  4. FV is the future or the final value of the loan, which can be avoided to avoid confusion.
  5. TYPE is the excel formula where if you are calculating the EMI at the start of the loan, then write 1, or if the EMI is calculated at the end of the loan, you have to write 0.


- Type in this formula and click Enter, and you will get the EMI for the loan.

Instead of going through all these hassles, one can easily calculate the loan amount on personal loan EMI calculators available online, which are fast and efficient.

Also, your relationship manager will inform you of the EMI amount and show you the whole calculation when you apply for a personal loan.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.