Loan Calculator

EMI Formula:

\[ EMI = \frac{P \times r \times (1+r)^n}{(1+r)^n - 1} \]

Principal Loan Amount (P):

₹

Annual Interest Rate:

Loan Term:

EMI (Monthly Payment):

Total Payment:

Total Interest:

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1. What is EMI?

EMI (Equated Monthly Installment) 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.

2. How Does the EMI Calculator Work?

The calculator uses the standard EMI formula:

\[ EMI = \frac{P \times r \times (1+r)^n}{(1+r)^n - 1} \]

Where:

\( P \) — Principal loan amount (₹)
\( r \) — Monthly interest rate (annual rate ÷ 12 ÷ 100)
\( n \) — Loan term in months

Explanation: The formula calculates the fixed monthly payment that will completely pay off the loan (principal + interest) over the loan term.

3. Importance of EMI Calculation

Details: Calculating EMI helps borrowers understand their monthly financial commitment, plan their budget effectively, and compare different loan offers from various lenders.

4. Using the Calculator

Tips: Enter the principal loan amount in ₹, annual interest rate in percentage, and loan term (in years or months). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What factors affect EMI amount?
A: EMI amount is determined by three factors: principal amount, interest rate, and loan tenure. Higher principal or interest rate increases EMI, while longer tenure reduces EMI.

Q2: Can EMI change during loan tenure?
A: For fixed-rate loans, EMI remains constant. For floating-rate loans, EMI may change if 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 original principal throughout the tenure. Reducing balance is more common and beneficial for borrowers.

Q4: How does prepayment affect EMI?
A: Prepayment reduces the outstanding principal, which can either reduce the EMI amount or shorten the loan tenure, depending on the borrower's preference.

Q5: Are there any hidden charges in EMI calculations?
A: This calculator shows only principal and interest components. Actual loans may include processing fees, insurance, or other charges that affect the total cost.