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's used to pay off both interest and principal each month so that over the loan term, the loan is paid off in full.

2. How Does the EMI Calculator Work?

The calculator uses the standard EMI formula:

Where:

• \( P \) — Principal loan amount
• \( R \) — 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 pay off the loan with interest over the specified term.

3. Importance of EMI Calculation

Details: Calculating EMI helps borrowers understand their monthly financial commitment, compare loan offers, and plan their finances accordingly before taking a loan.

4. Using the Calculator

Tips: Enter the 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: How does interest rate affect EMI?
A: Higher interest rates result in higher EMIs for the same principal and tenure. Even a small rate difference can significantly impact total repayment.

Q2: What's better - longer tenure with lower EMI or shorter tenure?
A: Shorter tenure means higher EMI but less total interest paid. Longer tenure reduces EMI but increases total interest cost.

Q3: Can EMI change during loan tenure?
A: For fixed-rate loans, EMI remains constant. For floating-rate loans, EMI may change when interest rates change.

Q4: What's included in EMI payments?
A: EMI includes both principal repayment and interest components, with interest portion higher initially and principal portion increasing over time.

Q5: How to reduce EMI burden?
A: Options include negotiating lower interest rates, making a larger down payment (reducing principal), or opting for longer tenure.