1. What is EMI Interest Per Month?

EMI (Equated Monthly Installment) interest per month refers to the interest portion of a loan payment for a specific month. It is calculated based on the outstanding principal balance and the monthly interest rate.

2. How Does the Calculator Work?

The calculator uses the interest formula:

Where:

• \( \text{Outstanding} \) — Outstanding principal balance (currency units)
• \( r \) — Monthly interest rate (decimal)

Explanation: The interest portion decreases as the outstanding principal decreases over the loan term, while the principal portion increases accordingly.

3. Importance of Interest Calculation

Details: Understanding the interest portion of EMI payments helps borrowers track how much they are paying towards interest vs principal, plan prepayments, and understand the true cost of borrowing.

4. Using the Calculator

Tips: Enter the outstanding principal balance in currency units and the monthly interest rate as a decimal (e.g., 0.01 for 1%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does the interest portion change over time?
A: The interest portion decreases over time as the outstanding principal balance decreases with each payment.

Q2: What's the difference between flat rate and reducing balance interest?
A: This calculator uses reducing balance method where interest is calculated on the outstanding principal, not the original loan amount.

Q3: How do I convert annual rate to monthly rate?
A: Divide the annual percentage rate by 12 and convert to decimal (e.g., 12% annual = 1% monthly = 0.01).

Q4: Why is my first EMI interest higher than subsequent months?
A: The first payment has the highest interest portion because the outstanding principal is at its maximum at the beginning of the loan term.

Q5: Can I reduce the interest I pay over the loan term?
A: Yes, by making prepayments or opting for a shorter loan tenure, you can significantly reduce the total interest paid.