EMI / Loan Calculator
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Calculate Your EMI
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What is an EMI?
An **Equated Monthly Installment (EMI)** is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. EMIs are used to pay off both interest and principal each month so that over a specified number of years, the loan is paid off in full.
This calculator helps you determine the exact monthly payment you will need to make to repay your loan over the desired period.
How is EMI Calculated?
The calculation for an EMI is based on a standard mathematical formula:
EMI = [P × r × (1+r)ⁿ] / [(1+r)ⁿ-1]Where:
- P = Principal Loan Amount (the total amount you borrow)
- r = Monthly Interest Rate (your annual rate divided by 12)
- n = Number of Monthly Installments (your loan tenure in years multiplied by 12)
Fixed vs. Floating Interest Rates
Understanding the type of interest rate is as important as the EMI amount itself.
| Feature | Fixed Rate | Floating Rate |
|---|---|---|
| EMI Amount | Remains the same for the entire loan tenure. | Changes based on market conditions (e.g., changes in the repo rate). |
| Budgeting | Easy to budget and plan finances. | Difficult to budget as payments can increase or decrease. |
| Interest Rate | Generally 1-2% higher than floating rates. | Generally lower than fixed rates to begin with. |
| Risk | No risk of market fluctuations. You are safe if rates go up. | You benefit if market rates go down, but you pay more if they go up. |
How to Use the EMI Calculator
Step-by-Step Guide
Loan Amortization & Tips
An **amortization schedule** is a table detailing each periodic payment on a loan. It shows how much of each payment goes towards interest and how much goes towards paying down the principal (the original loan amount).
In the beginning of your loan, a larger portion of your EMI goes towards interest. As you continue to pay, more of your EMI goes towards the principal, reducing your debt faster.
This is a placeholder. A graph here would show the principal vs. interest paid over the life of the loan.
Tips for Managing Your Loan
- Make Prepayments: If you have extra cash, making a partial payment towards your principal can drastically reduce your total interest and loan tenure.
- Choose Tenure Wisely: A shorter loan tenure (e.g., 15 years) means a higher EMI, but you will pay significantly less interest overall. A longer tenure (e.g., 30 years) means a smaller, more manageable EMI, but you will pay much more in total interest.
- Check Your Credit Score: A higher credit score can help you get a lower interest rate, saving you thousands over the life of the loan.