What is the formula for calculating the EMI for an education loan?

The EMI or Equated Monthly Instalment for an education loan can be calculated using the mathematical formula:

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

Where,

• P is the Principal Amount, or the original loan amount sanctioned.
• R is the annual Rate of Interest on the loan divided by 12 to convert to the monthly rate.
• N is the loan tenure in months.

For example, if you take an education loan of ₹12 lakhs at 10% annual interest rate for a tenure of 3 years (36 months):

• P = ₹12 lakhs
• R = 10/100/12 = 0.00833
• N = 36 months

Entering these in the formula:

EMI = [12,00,000 x 0.00833 x (1+0.00833)^36]/[(1+0.00833)^36-1]

The EMI, in this case, comes to ₹38,721 per month.