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EMI Formula:
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The EMI (Equated Monthly Installment) formula calculates the fixed payment amount a borrower makes to a lender at a specified date each calendar month. It's commonly used for loan refinancing, including credit card debt consolidation.
The calculator uses the EMI formula:
Where:
Explanation: The formula accounts for both principal and interest components of the loan payment, with interest being front-loaded in the early payments.
Details: Calculating EMI helps borrowers understand their monthly obligations and compare different loan options when refinancing credit card debt. It enables better financial planning and debt management.
Tips: Enter the principal amount you want to borrow, the annual interest rate of the refinance loan, and the repayment period in months. All values must be positive numbers.
Q1: Why refinance credit card debt with a loan?
A: Personal loans typically have much lower interest rates than credit cards (often 10-20% vs credit cards' 15-30%), saving you money on interest.
Q2: How does the interest rate affect my payments?
A: Even small differences in interest rates can significantly impact your total payment amount. A lower rate means more of your payment goes toward principal.
Q3: Should I choose a shorter or longer loan term?
A: Shorter terms mean higher monthly payments but less total interest paid. Longer terms reduce monthly payments but increase total interest costs.
Q4: Are there fees not included in this calculation?
A: Some loans have origination fees (typically 1-8% of the loan amount) which would increase your effective borrowing cost.
Q5: How accurate is this calculator?
A: This provides a close estimate, but your actual payment may vary slightly based on the lender's specific calculation method and any fees.