[1] As with most common types of loans, such as real estate mortgages, the borrower makes fixed periodic payments to the lender over the course of several years with the goal of retiring the loan.
In EMI plans, borrowers are mostly only allowed one fixed payment amount each month.
The formula for EMI (in arrears) is:[2] or, equivalently, Where: P is the principal amount borrowed, A is the periodic amortization payment, r is the annual interest rate divided by 100 (annual interest rate also divided by 12 in case of monthly installments), and n is the total number of payments (for a 30-year loan with monthly payments n = 30 × 12 = 360).
For example, if you borrow $10,000,000 from the bank at 10.5% annual interest for a period of 10 years (i.e., 120 months), then EMI = $10,000,000 × 0.00875 × (1 + 0.00875)120/((1 + 0.00875)120 – 1) = $134,935.
i.e., you will have to pay $134,935 for 120 months to repay the entire loan amount.