How to Calculate Your Monthly Loan Installment in Bangladesh

Short answer: Banks in Bangladesh calculate your monthly loan instalment (EMI) with the reducing-balance formula: EMI = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1], where P is the loan amount, r is the yearly interest rate divided by 12 (as a decimal), and n is the number of months. For example, a Tk 5 lakh loan at 13% for 3 years has an EMI of about Tk 16,847, and you pay about Tk 1.06 lakh in interest in total. Early instalments are mostly interest; later ones are mostly principal. Always check whether a lender quotes a reducing-balance rate or a “flat” rate, because a flat rate costs much more.

“How much will I pay each month?”

Jahid, 31, a sales executive in Khulna, wants a Tk 5 lakh loan to renovate his family’s home. The bank officer quoted “13% for three years” and an EMI, but Jahid wanted to check the maths himself before signing. “If I understand the number,” he says, “I can compare it with other banks.”

What is an EMI?

An EMI, or equated monthly instalment, is the fixed amount you pay every month until a loan is repaid. Each EMI has two parts: interest on the money you still owe, and principal, which reduces the loan. Most bank personal, car and home loans in Bangladesh work this way.

The EMI formula, step by step

Symbol	Meaning	Jahid’s example
P	Loan amount (principal)	Tk 5,00,000
Annual rate	Interest rate per year	13%
r	Monthly rate = annual rate ÷ 12 ÷ 100	13 ÷ 12 ÷ 100 = 0.010833
n	Number of monthly instalments	3 years × 12 = 36

1. Work out (1 + r)ⁿ: 1.010833 to the power of 36 is about 1.4736.
2. Multiply P × r × 1.4736: 5,00,000 × 0.010833 × 1.4736 ≈ 7,982.
3. Divide by (1.4736 − 1) = 0.4736: 7,982 ÷ 0.4736 ≈ Tk 16,847 a month.
4. Total paid: 16,847 × 36 ≈ Tk 6,06,491. Total interest: about Tk 1,06,491.

Our calculation. Small differences from a bank’s figure can come from rounding, day-count methods or fees.

Try it: simple EMI calculator

For a quick estimate only; your lender’s figure is final. Fees are not included.

How to calculate EMI in Excel or Google Sheets

Type =PMT(13%/12, 36, -500000) into a cell. The result, about 16,847, is the EMI. Change the rate, months and amount to test other loans.

Where does each instalment go?

Interest is charged on the remaining balance, so it is highest at the start. By our calculation for Jahid’s loan:

Month	Interest	Principal	Balance left
1	Tk 5,417	Tk 11,430	Tk 4,88,570
2	Tk 5,293	Tk 11,554	Tk 4,77,016
3	Tk 5,168	Tk 11,679	Tk 4,65,336
…	…	…	…
36	Tk 181	Tk 16,666	Tk 0

Month 1 interest = Tk 5,00,000 × 0.010833 ≈ Tk 5,417. The rest of the EMI, Tk 11,430, reduces the loan. This is also why paying extra early in a loan saves the most interest; see is early loan repayment worth it.

How do rate and tenure change your EMI?

Tk 5 lakh at 13%	Monthly EMI	Total interest
2 years	About Tk 23,771	About Tk 70,500
3 years	About Tk 16,847	About Tk 1,06,500
5 years	About Tk 11,377	About Tk 1,82,600

Tk 5 lakh for 3 years	Monthly EMI
11%	About Tk 16,369
13%	About Tk 16,847
15%	About Tk 17,333

Our calculations. A longer loan lowers the EMI but raises total interest sharply. Many bank loans have variable rates linked to a base rate, so the EMI or tenure can change later; BRAC Bank, for example, reviews its base rate every six months for home loans and yearly for auto and personal loans (BRAC Bank).

Beware the “flat rate”

Some lenders, shops and informal lenders quote a flat rate: interest calculated on the full original amount for the whole period, even as you repay. By our calculation, a Tk 5 lakh loan at a 13% flat rate for three years means Tk 1,95,000 in interest and an EMI of about Tk 19,306, compared with Tk 1,06,491 and Tk 16,847 on a reducing balance. A 13% flat rate is roughly equivalent to a reducing-balance rate of about 23%, by our calculation. Always ask which method is used.

What else adds to the cost?

• Processing fee: for example, Standard Chartered charges 0.5% of a personal loan (capped at Tk 15,000) plus VAT, as our review found.
• Insurance that some lenders require.
• Late payment charges if you miss an EMI.
• Early settlement fee, capped at 0.5% for bank term loans.

How much EMI can you afford?

A common rule of thumb is to keep all your EMIs well under half of your take-home pay, leaving room for rent, food, savings and emergencies. Banks check this too; see what banks look for before giving a loan. Comparing options? Read personal loan vs credit card EMI and how to get a home loan.

Back to Jahid

Jahid’s calculation matched the bank’s EMI to within a few taka. He then asked a second bank, which offered 12% for the same loan. “About Tk 240 less a month doesn’t sound like much,” he says, “but over three years it is enough to buy new kitchen tiles.”

---

This article is general information, not financial advice. Your lender’s loan agreement and repayment schedule are final.

Frequently asked questions

What is the EMI formula?

EMI = P × r × (1 + r)^n ÷ [(1 + r)^n − 1], where P is the loan, r is the monthly rate as a decimal, and n is the number of months.

What is the EMI on a Tk 5 lakh loan?

At 13% for 3 years, about Tk 16,847 a month. At 13% for 5 years, about Tk 11,377.

What is the difference between flat and reducing rates?

A flat rate charges interest on the original loan for the whole period; a reducing rate charges interest only on what you still owe. The same number costs much more as a flat rate.

Why is my first EMI mostly interest?

Because interest is charged on the outstanding balance, which is highest at the start. As you repay, the interest part shrinks and the principal part grows.

Can my EMI change?

Yes, on variable-rate loans. When the bank’s rate changes, your EMI or the loan term may be adjusted.

Key words explained

Term	What it means
EMI	Equated monthly instalment.
Principal	The amount you borrowed.
Tenure	The length of the loan.
Reducing balance	Interest on the amount still owed.
Flat rate	Interest on the original amount for the whole period.
Amortisation	The schedule showing how each payment is split between interest and principal.

How we reported this

We used the standard reducing-balance loan formula, BRAC Bank’s published base rate information and our own Standard Chartered review and early repayment guide. All examples and tables are our own calculations. The featured image is an illustration made by Dhaka Debates.

Editor’s note: Jahid is illustrative, created to show how a borrower might check a loan instalment. He is not a real person. The figures are our own calculations.