EMI Calculation Formula:
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EMI (Equated Monthly Installment) is the fixed payment amount made by a borrower to a lender at a specified date each calendar month. It's used to pay off both interest and principal each month so that over the loan term, the loan is paid off in full.
The calculator uses the EMI formula:
Where:
Explanation: The formula calculates the fixed payment amount that includes both principal and interest components for each month of the loan term.
Details: Calculating EMI helps borrowers understand their monthly payment obligations, compare different loan offers, and plan their finances accordingly when consolidating credit card debt.
Tips: Enter the principal amount (total debt to consolidate), annual interest rate (APR), and loan term in months. All values must be positive numbers.
Q1: What's the benefit of consolidating credit card debt with a loan?
A: Personal loans typically have lower interest rates than credit cards, fixed repayment terms, and a single monthly payment.
Q2: How does loan tenure affect EMI?
A: Longer tenures reduce EMI but increase total interest paid. Shorter tenures increase EMI but reduce total interest.
Q3: What's a good interest rate for debt consolidation?
A: Rates vary by credit score, but generally anything lower than your current credit card APR (typically 15-25%) is beneficial.
Q4: Are there fees associated with debt consolidation loans?
A: Some lenders charge origination fees (1-6% of loan amount), prepayment penalties, or late fees.
Q5: Should I pay off credit cards completely after getting the loan?
A: Yes, use the loan to pay off cards completely to avoid paying both high credit card interest and loan interest.