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EMI Calculation Formula:
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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 tenure, the loan is paid off in full.
The calculator uses the standard EMI formula:
Where:
Explanation: The formula calculates the fixed monthly payment that would completely pay off the loan over its tenure, including both principal and interest components.
Details: Understanding your EMI helps in financial planning, comparing loan offers, and ensuring the monthly payment fits within your budget before committing to a loan.
Tips: Enter the principal amount in Rs, annual interest rate in percentage, and loan tenure in months. All values must be positive numbers.
Q1: What factors affect my EMI amount?
A: EMI depends on three main factors: loan amount, interest rate, and loan tenure. Higher amounts or rates increase EMI, while longer tenures reduce EMI.
Q2: How does prepayment affect my EMI?
A: Prepayment reduces your principal amount, which can either reduce your EMI or shorten your loan tenure, depending on the terms.
Q3: What's 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 full principal for the entire tenure.
Q4: Are there any hidden charges in EMI calculation?
A: This calculator shows pure EMI based on principal and interest. Actual loans may include processing fees or insurance which aren't reflected here.
Q5: Can I change my EMI amount after taking the loan?
A: Some lenders offer EMI restructuring options, but terms vary. Check with your bank for specific policies.