1. What is the EMI Formula?

The EMI (Equated Monthly Installment) formula calculates the fixed payment amount a borrower makes to a lender at a specified date each calendar month. It's commonly used for loan repayment calculations.

2. How Does the Calculator Work?

The calculator uses the standard EMI formula:

Where:

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

Explanation: The formula accounts for both principal and interest components of the loan payment, with the interest portion being higher at the beginning of the loan term.

3. Importance of EMI Calculation

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

4. Using the Calculator

Tips: Enter principal amount in RM, 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 amount?
A: EMI depends on three factors - loan amount, interest rate, and loan tenure. Higher amount/rate increases EMI, while longer tenure reduces EMI.

Q2: How does changing tenure affect my loan?
A: Longer tenure reduces EMI but increases total interest paid. Shorter tenure means higher EMI but less total interest.

Q3: Is EMI the best way to repay a loan?
A: EMI is the most common method as it provides predictable payments. Other methods like step-up or balloon payments may be available for specific needs.

Q4: Does EMI remain constant throughout the loan term?
A: Yes, EMI remains fixed for fixed-rate loans. For floating-rate loans, EMI may change if interest rates change.

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