1. What is the EMI Formula?

The EMI (Equated Monthly Installment) formula calculates the fixed payment amount a borrower pays to the lender each month. It's commonly used for car loans, home loans, and other installment loans.

2. How Does the Calculator Work?

The calculator uses the standard EMI formula:

Where:

• \( P \) — Principal loan amount (Rs)
• \( R \) — Monthly interest rate (annual rate / 12, as decimal)
• \( N \) — Loan tenure in months

Explanation: The formula accounts for both principal repayment and interest payment components in each EMI installment.

3. Importance of EMI Calculation

Details: Accurate EMI calculation helps borrowers understand their monthly obligations, compare loan offers, and plan their finances accordingly.

4. Using the Calculator

Tips: Enter principal amount in Rs, annual interest rate in percentage, and loan tenure in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between reducing balance and flat interest rate?
A: This calculator uses reducing balance method where interest is calculated on outstanding principal. Flat rate calculates interest on original principal throughout the tenure.

Q2: Are there any prepayment charges for car loans?
A: Many banks like Axis Bank and HDFC allow partial prepayments after 6-12 months, often with nominal charges or sometimes free.

Q3: How does loan tenure affect EMI?
A: Longer tenure reduces EMI but increases total interest paid. Shorter tenure means higher EMI but less total interest.

Q4: What factors affect car loan interest rates?
A: Rates depend on credit score, loan amount, tenure, car model, and relationship with the bank.

Q5: Can I get 100% financing for a car loan?
A: Most banks finance up to 85-90% of the car's ex-showroom price. Some may offer 100% for specific models or customers.