Interest Calculator Per Annum

EMI Formula:

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

EMI (Monthly Payment):

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1. What is EMI Calculation?

EMI (Equated Monthly Installment) is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. It is used to pay off both interest and principal each month so that over a specified number of months, the loan is paid off in full.

2. How Does the Calculator Work?

The calculator uses the EMI formula:

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

Where:

\( P \) — Principal loan amount (currency units)
\( r \) — Monthly interest rate (decimal)
\( m \) — Loan term in months

Explanation: The formula calculates the fixed monthly payment required to fully amortize a loan over its term, accounting for both principal and interest components.

3. Importance of EMI Calculation

Details: Accurate EMI calculation helps borrowers understand their repayment obligations, plan their finances effectively, and compare different loan offers from various lenders.

4. Using the Calculator

Tips: Enter the principal amount in currency units, annual interest rate as a percentage, and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between flat interest rate and reducing balance rate?
A: Flat interest is calculated on the original principal throughout the loan term, while reducing balance interest is calculated on the outstanding principal, which decreases over time.

Q2: Can EMI change during the loan term?
A: For fixed-rate loans, EMI remains constant. For floating-rate loans, EMI may change when interest rates change.

Q3: What factors affect EMI amount?
A: EMI is affected by principal amount, interest rate, and loan tenure. Higher principal or interest rate increases EMI, while longer tenure reduces EMI.

Q4: Is there any prepayment penalty?
A: Some lenders charge a prepayment penalty for paying off the loan early. Check with your lender about their specific policies.

Q5: How does part payment affect EMI?
A: Part payment reduces the outstanding principal, which can either reduce the EMI amount or shorten the loan tenure, depending on the lender's policy.