Finance
How to Calculate a Monthly Loan Payment
AllinOne Editorial · Published 2026-09-16
A standard loan payment is EMI under another name: equal installments, reducing balance, amortization table included.
If you know the principal, the annual interest rate and the term in years, you can compute a fixed monthly payment that pays the loan off exactly. That schedule is called amortization: each row shows interest for the month, principal repaid, and what is still owed.
Formula
Monthly rate r = annual rate ÷ 12. For n months, payment = P × r(1+r)^n ÷ ((1+r)^n − 1). Zero interest is P ÷ n. This is the same reducing-balance formula as the EMI calculator.
Worked example
A 2,500,000 loan at 14% for 5 years is 60 payments of 58,170.63. Total interest is 990,237.63 and total repayment is 3,490,237.63. Open the amortization table on the Loan Calculator to see principal and interest split each month.
- The payment amount stays the same (except a possible last-month rounding fix).
- Interest each month = remaining balance × r.
- Principal that month = payment − interest.
Fees, insurance and tax on the asset are not in this model. Add capitalized fees to P if the lender does.
Frequently asked questions
Why is the first payment almost all interest?+
Interest that month is charged on the full remaining principal. Early on, that interest is large, so little of the payment is left to reduce the balance.
Related articles
Finance
How to Calculate EMI
Equal monthly installments pay interest first, then principal. The formula is the same one banks use for a fully amortizing loan.
AllinOne Editorial · 2026-09-16
Finance
How to Calculate Compound Interest
Savings grow on a larger base each period. A loan EMI shrinks a balance — do not mix the two formulas.
AllinOne Editorial · 2026-09-16