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What is EMI?
EMI stands for Equated Monthly Installment, which is a specific amount paid by the borrower to the lender on a fixed date each month. This instalment covers both the loan’s principal and interest, ensuring that the loan is paid off over a set period.
What is an EMI Calculator?
An EMI calculator is a tool that helps borrowers determine the monthly payment (EMI) required for repaying a loan. The EMI is made up of two components: the principal and the interest. The calculator simplifies the process by instantly calculating the EMI based on the loan amount, interest rate, and tenure.
What are Principal and Interest?
The EMI is split into two parts: the principal (the loan amount) and the interest (the cost of borrowing). Basically, the interest component of the EMI is higher, while the principal repayment increases gradually over time as the loan balance decreases.
What are Loan Tenure and Interest Rate?
The EMI amount is influenced by the loan amount, interest rate, and loan tenure. Longer tenures typically result in smaller EMI amounts but may lead to higher total interest paid throughout the loan’s duration.
How to calculate EMI?
EMIs are calculated using a formula that follows the loan principal, the interest rate, and the tenure period of the loan. We provide EMI calculators on our websites to help borrowers estimate their monthly payments.
Here’s the formula to calculate EMI:
where
E is EMI
P is Principal Loan Amount
r is rate of interest calculated on monthly basis. (i.e., r = Rate of Annual interest/12/100. If rate of interest is 10.5% per annum, then r = 10.5/12/100=0.00875)
n is loan term / tenure / duration in number of months
How to Use an EMI Calculator?
Using an EMI calculator is simple. Enter the loan principal, tenure, and interest rate, and the calculator will immediately display the EMI amount. This tool is free to use and helps borrowers make informed financial decisions. It is essential to ensure that the debt-to-income ratio is below 50% to improve the likelihood of loan approval. The calculator saves time and eliminates the chances of manual errors, providing precise results. It can be used for all type of loan to estimate the EMI amount accurately.
What is a Loan Amortization Schedule?
A amortization schedule is a detailed table that breaks down each payment’s contribution toward the interest and principal repayment over the course of the loan. This schedule helps borrowers plan their budget and understand the total interest paid over time, aiding in financial decision-making. It also plays a role in tax planning and potential savings.
Types of EMI Calculators
EMI Calculators can be categorized into ten types of loan calculators:
EMI calculator can assist you with sorting out your regularly scheduled installments on various kinds of Loans. These incorporate home loans, vehicle advances, commercial loans individual credits, etc. They can likewise assist you with understanding the amount you can afford to borrow based on your income and other factors like age, etc.
P - Principal
R - Rate
N - Number of Years
A Home Buyer can utilize a loan calculator to look at current interest rate offers from various banks. The outcomes show the complete expense of getting along with each EMI. This will assist with reducing the most ideal choices for clients and applying for a loan that accommodates their particular requirements and plan better.
Tenure of any term loan is linked to the age of an individual seeking loan and also the policy of the financial institution. Whilst it is beneficial to take a longer duration to keep the monthly obligation lower, it is also a fact that higher tenure means higher amount of interest servicing during the tenure of the loan. So there has to be a balance which should be worked out with the help of a professional considering future obligations also.
Rate of Interest gets impacted by several Micro and Macro economic factors. Many of those are non predictable. Floating loan rates are usually 50-100 basis points higher than Fixed rates. One should opt for Floating rate if there are chances of rates moving southwards in the near future and vice versa.
