1. What is EMI?

EMI (Equated Monthly Installment) is the fixed payment amount made by a borrower to a lender at a specified date each calendar month. EMIs are used to pay off both interest and principal each month so that over time, the loan is paid off in full.

2. How Does the Calculator Work?

The calculator uses the EMI formula:

Where:

• \( P \) — Principal loan amount ($)
• \( R \) — Monthly interest rate (annual rate / 12 / 100)
• \( N \) — Loan tenure in months
• \( EMI \) — Equated monthly installment ($)

Explanation: The formula calculates the fixed payment amount that includes both principal and interest components for each month of the loan term.

3. Importance of EMI Calculation

Details: Calculating EMI helps borrowers understand their repayment obligations, plan their finances, and compare different loan options before committing to a loan.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What happens if I pay more than the EMI?
A: Paying more than the EMI can reduce your principal faster, potentially lowering total interest paid and shortening loan tenure.

Q2: Does EMI remain constant throughout the loan tenure?
A: For fixed-rate loans, EMI remains constant. For floating-rate loans, EMI may change when interest rates change.

Q3: What's the difference between reducing balance and flat interest rate?
A: Reducing balance calculates interest on outstanding principal, while flat rate calculates interest on original principal for entire tenure.

Q4: Can I prepay my loan?
A: Most lenders allow prepayment, sometimes with a prepayment penalty. Check your loan terms.

Q5: How does loan tenure affect EMI?
A: Longer tenure reduces EMI but increases total interest paid. Shorter tenure increases EMI but reduces total interest.