1. What is EMI?

EMI (Equated Monthly Installment) is the 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 fully paid off along with interest.

2. How Does the Calculator Work?

The calculator uses the EMI formula:

Where:

• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate divided by 12 and converted to decimal)
• \( n \) — Loan tenure in months

Explanation: The formula calculates the fixed payment amount that includes both principal repayment and interest on the outstanding amount.

3. Importance of EMI Calculation

Details: Calculating EMI helps borrowers understand their monthly financial commitment and plan their budget accordingly before taking a loan.

4. Using the Calculator

Tips: Enter principal amount in dollars, annual interest rate in percentage, and loan tenure in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What happens if I pay more than the EMI?
A: Paying more than the EMI reduces the principal faster, which can decrease the total interest paid and shorten the loan tenure.

Q2: Does EMI remain constant throughout the loan tenure?
A: Yes, for fixed-rate loans the EMI remains constant. For floating-rate loans, EMI may change when interest rates change.

Q3: What is the difference between reducing balance and flat interest rate?
A: Reducing balance calculates interest on outstanding principal while flat rate calculates interest on the original principal for the entire tenure.

Q4: How does loan tenure affect EMI?
A: Longer tenure reduces EMI but increases total interest paid. Shorter tenure increases EMI but reduces total interest.

Q5: Can I prepay my loan?
A: Most lenders allow prepayment, though some may charge a prepayment penalty. Check with your lender for specific terms.