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 and interest components.

2. How Does the Calculator Work?

The calculator uses the standard EMI formula:

Where:

• \( P \) — Principal loan amount (LSL)
• \( R \) — Monthly interest rate (annual rate divided by 12, in decimal)
• \( N \) — Loan tenure in months

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

3. Importance of EMI Calculation

Details: Knowing your EMI helps in financial planning and budgeting. It allows you to assess loan affordability before committing to a loan agreement.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between reducing balance and flat interest rate?
A: This calculator uses reducing balance method where interest is calculated on the outstanding principal. Flat rate calculates interest on the original principal for the entire tenure.

Q2: Can I prepay my loan to reduce EMI?
A: Prepayment typically reduces the loan tenure rather than the EMI amount, unless you specifically request for EMI recalculation.

Q3: Does this include any processing fees or insurance?
A: No, this calculates only the principal and interest components. Additional charges may apply as per FNB Lesotho's terms.

Q4: How does loan tenure affect EMI?
A: Longer tenure reduces EMI but increases total interest paid. Shorter tenure means higher EMI but less total interest.

Q5: What is a good EMI-to-income ratio?
A: Generally, EMI should not exceed 40-50% of your monthly income to maintain financial stability.