1. What is EMI?

EMI (Equated Monthly Installment) is the fixed payment amount a borrower pays to a lender each month. It consists of both principal and interest components, with the interest portion being higher at the beginning of the loan term.

2. How Does the Calculator Work?

The calculator uses the standard EMI formula:

Where:

• \( P \) — Principal loan amount
• \( R \) — Monthly interest rate (APR/12)
• \( N \) — Loan tenure in months

Explanation: The formula calculates the fixed monthly payment that will completely pay off the loan (principal + interest) over the specified term.

3. Understanding Your Loan Breakdown

Details: Early in the loan, most of your payment goes toward interest. As you pay down the principal, more of each payment goes toward reducing the balance.

4. Using the Calculator

Tips: Enter the loan amount, annual percentage rate (APR), and loan term in months. The calculator will show your monthly payment, total repayment amount, and total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: Why does most of my early payment go to interest?
A: Interest is calculated on the outstanding balance, which is highest at the beginning. This is how amortizing loans work.

Q2: How can I reduce my total interest paid?
A: Make extra principal payments when possible, choose a shorter loan term, or negotiate a lower interest rate.

Q3: What's the difference between APR and interest rate?
A: APR includes both the interest rate and any additional fees, giving a more complete picture of loan cost.

Q4: Are there prepayment penalties?
A: Some lenders charge fees for paying off loans early. Check your loan agreement for details.

Q5: How does compound interest work in loans?
A: Interest is typically compounded monthly, meaning each month's interest is based on the current balance including previously accrued interest.