calculate how much you need to pay every month towards your loan repayment,
based on the Loan amount, Interest rate and Tenure, so repayments become comfortable.
EMI stands for Equated Monthly Installment for the loan you avail from your bank. The EMI consists of the principal portion of the loan amount and the interest. Therefore, EMI = principal amount + interest paid on the loan. The EMI, usually, remains fixed for the entire tenure of your loan, and it is to be repaid over the tenure of the loan on a monthly basis.
Mathematically, EMI is calculated as under:
P x R x (1+R)^N / [(1+R)^N-1]
P = Principal amount of the loan
R = Rate of interest
N = Number of monthly installments.
Here are the five benefits of using the EMI calculator:
- Easy to access
- Saves time and energy instead of performing manual calculations
- Provides quick results
- Helps you ascertain if the monthly EMI is affordable or not
- Aids you in financial planning
Do note that during the initial years of your loan tenure, you pay more towards interest, and gradually, as you repay the loan, a higher portion is adjusted towards the principal component (see table below). This is because; EMIs are computed on a reducing balance method, which works in your favor as a borrower.
Remember, the interest rate and your loan tenure are the vital deciding factors for your loan EMI. Higher the interest rate on the loan, higher will be your EMI and vice-versa. Similarly, a shorter loan tenure increases your EMI and vice versa.