1. What is EMI Calculation?

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

2. How Does the Calculator Work?

The calculator uses the standard EMI formula:

Where:

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

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

3. Importance of EMI Calculation

Details: Accurate EMI calculation helps borrowers understand their repayment obligations, plan finances accordingly, and compare different loan options before making borrowing decisions.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: How is monthly interest rate calculated?
A: Annual rate is divided by 12 to get monthly rate, then divided by 100 to convert from percentage to decimal.

Q2: Does this calculator account for processing fees?
A: No, this calculates only the EMI based on principal and interest. Additional fees should be considered separately.

Q3: What's the difference between reducing balance and flat rate EMI?
A: This calculator uses reducing balance method where interest is calculated on outstanding principal each month.

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

Q5: Can I prepay my loan to reduce EMI?
A: Prepayment typically reduces tenure rather than EMI, unless you specifically request for EMI reduction.