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. It includes both principal repayment and interest on the outstanding amount.

2. How Does the Calculator Work?

The calculator uses Bankbazaar's EMI formula:

Where:

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

Explanation: The formula calculates the fixed monthly payment that would pay off the loan over its term, including both principal and interest components.

3. Importance of EMI Calculation

Details: Calculating EMI helps borrowers understand their repayment obligations, compare loan offers, and plan their finances accordingly.

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 factors affect EMI?
A: EMI depends on principal amount, interest rate, and loan tenure. Higher principal/rates increase EMI, while longer tenures reduce EMI.

Q2: How does EMI composition change over time?
A: Initially, more of EMI goes toward interest. As principal reduces, interest component decreases and principal repayment increases.

Q3: What is prepayment and how does it affect EMI?
A: Prepayment reduces principal, which can either reduce EMI or loan tenure. Some lenders charge prepayment penalties.

Q4: Are there different types of EMI calculations?
A: Yes, some loans use flat interest rate method, but reducing balance method (shown here) is more common and fairer.

Q5: How accurate is this calculator?
A: This provides standard EMI calculation. Actual EMI may vary slightly due to rounding or lender-specific policies.