By CalcBase Team · Updated 2025 · 8 min read

How Personal Loan EMI Is Calculated (With Examples)

Personal loan EMI calculation illustration

Personal loans are commonly used for weddings, travel, medical expenses, education, or emergency needs. Before applying, it’s crucial to understand how your personal loan EMI is calculated so you can choose the right tenure and avoid unnecessary interest burden.

What Is Personal Loan EMI?

Personal Loan EMI (Equated Monthly Installment) is the fixed amount you pay every month to repay your loan. Unlike secured loans, personal loans usually have higher interest rates because no collateral is involved.

Principal: The amount borrowed from the lender.
Interest: The cost charged by the bank or financial institution.

Personal loan interest and principal breakdown

Personal Loan EMI Calculation Formula

Banks and NBFCs calculate personal loan EMI using the reducing balance method, where interest is applied only on the outstanding loan amount.

EMI = P × R × (1 + R)^N / [(1 + R)^N − 1]

P = Personal loan amount
R = Monthly interest rate
N = Loan tenure in months

Personal Loan EMI Calculation Example

Let’s understand personal loan EMI with a real-world example:

Loan Amount: $10,000
Interest Rate: 12% per year
Loan Tenure: 3 years (36 months)

Estimated Monthly EMI: $330 – $335

In the early months, a larger portion of your EMI goes towards interest. As the loan tenure progresses, the principal component gradually increases.

Factors That Affect Personal Loan EMI

Loan Amount: Higher loan amounts increase monthly EMI.
Interest Rate: Personal loans usually carry higher rates than secured loans.
Loan Tenure: Longer tenure reduces EMI but increases total interest paid.
Credit Score: A good credit score helps secure lower interest rates.

Tips to Reduce Your Personal Loan EMI

Choose the shortest tenure you can afford comfortably.
Maintain a high credit score before applying.
Compare offers from multiple lenders.
Use part-prepayments to reduce outstanding principal.

Personal Loan EMI – Frequently Asked Questions

Is personal loan EMI fixed?

Yes, for most fixed-rate personal loans, the EMI remains constant throughout the tenure.

Does longer tenure reduce EMI?

Yes, but it significantly increases the total interest paid over time.

Calculate Your Personal Loan EMI Instantly

Use CalcBase’s free personal loan EMI calculator to estimate your monthly payments and choose the best repayment plan.

Try Personal Loan Calculator