Understand What is EMI and How EMI is Calculated

Learn what is EMI and it's meaning (Equated Monthly Instalment), how EMI works, and the simple EMI formula to know how EMI Calculated. Understand how EMIs make big purchases affordable and explore smart shopping options with the Bajaj Finserv Insta EMI Card.
Understand What is EMI and How EMI is Calculated
2 mins
20 September 2025

If you have ever taken a loan or considered purchasing something expensive, you have likely come across the term EMI. EMI stands for Equated Monthly Instalment, which refers to the fixed sum you pay every month to clear a loan or purchase. Each instalment includes a portion of the principal along with the interest, ensuring that repayment is spread out over time rather than in one go. Whether it’s a home loan, personal loan, car loan, or even buying electronics, EMIs make these costs far more manageable. This article explains what EMI is, how it is calculated, and how solutions like the Bajaj Finserv Insta EMI Card bring flexible and convenient shopping options..

What is EMI?

EMI stands for Equated Monthly Instalment. It’s the fixed amount you pay every month to repay a loan or a purchase. This amount includes both the principal (the original amount you borrowed) and the interest (the extra cost charged by the lender).

You usually pay EMIs on:

  • Home loans
  • Personal loans
  • Car or bike loans
  • Education loans
  • Consumer durables (like phones, laptops, TVs, etc.)

Thanks to EMI plans, you can enjoy a product or service immediately and pay for it gradually.

How does EMI work?

When you opt for an EMI, the lender divides the total amount you owe into monthly payments. These payments are scheduled over a fixed tenure (which could be 3 months, 6 months, 12 months, or more). Each EMI includes:

  • A portion of the principal
  • A portion of the interest

At the beginning of your repayment, a higher portion of your EMI goes towards interest. Over time, a larger portion goes toward the principal. This is known as amortization.

Example of how EMI is calculated

Let’s say you buy a washing machine worth Rs. 24,000 using EMI over 12 months with an interest rate of 10% per year. Your EMI will include both:

  • A part of the Rs. 24,000 (principal)
  • The interest charged by the lender

This way, instead of paying Rs. 24,000 upfront, you can pay a fixed amount every month—say Rs. 2,112—until the total amount is paid off.

Types of EMI plans

There are two main types of EMI plans:

1. Standard EMI (with interest)

This is the most common EMI plan. It includes both principal and interest. The interest rate depends on your credit score, the lender’s terms, and the type of loan.

2. Easy EMI with the Bajaj Finserv Insta EMI Card

The Bajaj Finserv Insta EMI Card lets you split your purchases into easy EMIs with:

  • No credit card reuired
  • Minimal or zero down payment

  • Flexible tenure options from 3 to 60 months

  • Over 1.5 lakh partner stores and 1 million+ products

  • Zero to low interest cost depending on the offer

With this card, you can shop for gadgets, appliances, furniture, lifestyle products, and even pay for travel, insurance, and medical bills—all on easy EMIs.

How is EMI calculated?

EMIs are calculated using a formula based on:

  • Principal amount (P)
  • Interest rate per month (r)

  • Loan/tenure in months (n)

EMI Formula:

EMI=P×r×(1+r)n(1+r)n−1EMI = \frac{P \times r \times (1 + r)^n}{(1 + r)^n - 1}EMI=(1+r)n−1P×r×(1+r)n​

EMI calculation example:

Let’s assume:

  • Loan amount (P) = Rs. 50,000

  • Annual interest rate = 12%

  • Monthly interest rate (r) = 12 / (12 × 100) = 0.01

  • Tenure (n) = 12 months

Now plug these into the formula:

EMI=50000×0.01×(1+0.01)12(1+0.01)12−1≈Rs. 4,435EMI = \frac{50000 \times 0.01 \times (1 + 0.01)^{12}}{(1 + 0.01)^{12} - 1} \approx Rs. 4,435EMI=(1+0.01)12−150000×0.01×(1+0.01)12​≈Rs. 4,435

So, you’ll pay around Rs. 4,435 every month for a year to repay Rs. 50,000. Use the Bajaj Finserv EMI Network Calculator for instant and accurate calculations.

Factors that affect EMI calculations

Several factors influence how much EMI you’ll pay:

1. Loan Amount

Higher the loan, higher the EMI.

2. Interest Rate

Higher interest rate means you pay more every month.

3. Repayment Tenure

A longer tenure reduces your EMI but increases the total interest paid.

4. Type of Loan

Personal loans may have higher EMIs than home loans due to higher interest rates.

Advantages of EMI

  • Freedom to purchase immediately: EMIs let you own high-value items right away, even if you don’t have the complete funds available. For example, salaried individuals can buy a home or vehicle more easily through EMIs than by making a lump-sum payment.

  • Affordable repayments: From appliances and gifts to property, EMIs break the total cost into smaller monthly instalments, making repayment comfortable.

  • Budget-friendly option: Since the instalment amount is predetermined, EMIs help you plan finances without straining your pocket.

  • Helps in planning: Online EMI calculators show the monthly outflow based on loan amount, rate of interest, and duration.

  • Flexible options: Many lenders provide adaptable EMI schemes where you can select the tenure or payment amount according to your income.

  • Direct repayment: Payments are made directly to the lender, with no third-party involvement.

Benefits of shopping with the Insta EMI Card

The Bajaj Finserv Insta EMI Card is a powerful tool for managing big-ticket purchases. Here’s how it simplifies shopping:

  • 100% digital process

  • Pre-qualified card loan limit of up to Rs. 3 lakh

You can apply for and use the card entirely online.

  • Pre-approved Limit of Up to ₹3 Lakhs

Get instant access to a high-limit card for shopping.

  • Shop from 1.5 lakh+ stores

Use the card at partner stores across India—both online and offline.

  • No Foreclosure Charges

Want to pay off early? No penalty fees involved.

  • Wide Range of Products

Buy smartphones, ACs, furniture, gym memberships, and even medical treatments.

  • Flexible Tenure

Choose a repayment period that works for you—3 month to 60 months.

Where You can use the Insta EMI Card

Here’s a look at the kind of platforms where you can use your Insta EMI Card. Don’t have your card yet? Check your Insta EMI Card offers now by entering your mobile phone number and verifying it with an OTP.

Category

Examples

Electronics

Croma, Reliance Digital, Vijay Sales

E-commerce

Amazon, Flipkart, Bajaj Mall

Travel & Holiday

MakeMyTrip, Goibibo

Fitness & Lifestyle

Cult.fit, VLCC, Livspace

Education & Coaching

UpGrad, BYJU’S, coaching institutes

Healthcare

Apollo, Dr. Batra’s, dental and eye clinics

 

Tips to manage your EMI wisely

  1. Choose a tenure you can comfortably manage

    • Don’t overburden your monthly budget.

  2. Know your total interest outflow

    • Sometimes shorter tenure = less total interest.

  3. Set EMI reminders

    • Avoid late fees and impact on credit score.

  4. Use the Insta EMI Card for zero-cost deals

    • Many sellers offer no-interest EMI options.

  5. Avoid unnecessary loans

    • Only borrow what you truly need.


Final thoughts

EMIs make it easier to afford what you need—without straining your monthly budget. Whether you’re planning to buy a phone, book a vacation, or upgrade your home appliances, understanding how EMI works helps you make smarter choices.

If you want the flexibility of EMIs without the hassle of paperwork, high interest, or credit card approvals, the Bajaj Finserv Insta EMI Card is your ideal solution. Check your eligibility now using your mobile phone number and OTP for verification.

Ready to shop smarter?

Unlock over 1 million products on easy EMIs with the Bajaj Finserv Insta EMI Card.

Apply Now and enjoy instant access to smart, stress-free shopping.

Bajaj Finserv app for all your financial needs and goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

Disclaimer

1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same.

Frequently asked questions

What is EMI and how does it work?

EMI or Equated Monthly Instalment is simply the cost of your purchase that is divided into equal parts that you will have to pay monthly in order to fulfil the payment. The number of months and the monthly amount you owe is predetermined. The EMI is dependent on the following factors:

  1. Principal borrowed
  2. Rate of interest
  3. Loan tenure

Apply for Insta EMI Card

What is the benefit of an EMI?

Shopping on EMI lets you convert the cost of your purchase into easy monthly payments. This makes your shopping more affordable.

Is EMI good or bad?

EMIs are good if you pay them on time as they also help you improve your CIBIL Score.

Are EMIs interest-free?

With the Bajaj Finserv Insta EMI Card, the EMIs are interest-free. They are called No Cost EMIs.

Can EMIs be refunded?

No, EMIs are not refunded if you are paying them against a borrowed amount.

How to calculate EMI with an example?

To calculate EMI (Equated Monthly Instalment), you can use the following formula: EMI = P * r * (1 + r)^n / ((1 + r)^n - 1), where P is the principal loan amount, r is the monthly interest rate (annual rate divided by 12), and n is the loan tenure in months.

For example, if you borrow Rs. 10,000 at an annual interest rate of 6% for 3 years (36 months), the monthly EMI would be EMI = 10,000 * (0.06/12) * (1 + 0.06/12)^36 / ((1 + 0.06/12)^36 - 1) = Rs. 303.87.

What is the difference between an EMI and a loan?

EMI (Equated Monthly Instalment) and a loan are closely related but distinct concepts. EMI is the fixed monthly payment made towards repaying a loan, which includes both principal and interest. A loan, on the other hand, refers to the sum borrowed from a lender, and it needs to be repaid, often through EMIs. The key difference is that EMI represents the monthly instalment to be paid, while a loan encompasses the entire amount borrowed.

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