1. What is the EMI Formula?

The EMI (Equated Monthly Installment) formula calculates the fixed payment amount a borrower makes to a lender each 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 (AUD)
• \( R \) — Monthly interest rate (annual rate divided by 12, in decimal)
• \( N \) — Loan tenure in months

Explanation: The formula accounts for compound interest over the loan period, ensuring each payment reduces both principal and interest.

3. Importance of EMI Calculation

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

4. Using the Calculator

Tips: Enter principal amount in AUD, 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 flat rate and reducing balance rate?
A: Flat rate calculates interest on the original principal throughout the loan term, while reducing balance (used here) calculates interest on the outstanding principal.

Q2: How does loan tenure affect EMI?
A: Longer tenures reduce EMI but increase total interest paid. Shorter tenures increase EMI but reduce total interest.

Q3: Are there other charges included in EMI?
A: This calculator shows only principal and interest. Actual EMI may include insurance or processing fees.

Q4: Can I prepay my loan?
A: Most lenders allow prepayment, often with some charges. Prepayment reduces total interest.

Q5: How accurate is this calculator?
A: It provides standard EMI calculation. Actual EMI may vary based on lender's specific terms and conditions.