What is EMI?
Equated Monthly Installment (EMI) is the amount paid to the bank or other financial institution every month until the debt is entirely paid off. It includes loan interest as well as a portion of the principal amount to be repaid. The sum of the principal and interest is divided by the loan's term, or the number of months it must be returned. This sum must be paid on a monthly basis. The interest component of the EMI would be higher at the beginning and subsequently decrease with each payment. The exact percentage allocated to the principal payment is determined by the interest rate. While your monthly EMI payment will remain constant, the proportion of principal and interest components will alter over time. With each payment, you'll pay more toward the principal and less toward interest.
EMI Calculation Formula
where
E - stands for EMI
P - stands for Principal Loan Amount
r - the monthly interest rate (calculated as Annual Interest Rate/12/100)
n - denotes the loan term/tenure/duration in months.
How to use EMI calculator
Using an EMI (Equated Monthly Installment) calculator is straightforward. Here's a general guide:
1. Input Loan Details:
- Enter the loan amount you wish to borrow.
- Input the interest rate offered by the lender.
- Specify the loan tenure or the number of months you plan to repay the loan.
2. Calculate:
- Once you've entered these details, click on the "Calculate" or "Check EMI" button.
3. Results:
- The EMI calculator will display your monthly installment amount.
- It may also provide a breakup of the total interest payable over the loan tenure.
Remember, the EMI is a fixed amount you need to pay each month, comprising both principal and interest components. It's a useful tool to estimate your monthly financial commitment before taking a loan.
