EMI Calculator
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Emi
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What is EMI?
EMI stands for Equated Monthly Installment. It’s the fixed amount of money you pay each month to the lender unit you’ve completely repaid your loan amount along with the interest. EMIs are used widely for various loans like home loans, car loans, personal loans, and others.
The EMI amount covers both the principal loan amount and the interest charged by the lender. The schedule for EMI payments is predetermined and factors in the loan amount, duration, interest rate, and additional charges.
What are the Components of EMI?
The components of an EMI typically include the following:
Principal amount: This is the actual amount borrowed by you, which you repay to the lender over time.
Interest rate: It’s the percentage at which the lender charges interest on the principal amount you borrowed.
Loan Tenure: This is the duration for which you take the loan, specifying the number of months or years for repayment.
Processing fees: This is a one – time fee charged by the lender for processing you loan application.
Repayment charges: If you decide to repay your loan before the agreed tenure ends, the lender may impose an additional charge for this.
Why should I go with EMI option? Is there a better alternative available?
The EMI option can be a great help for individuals looking to make significant purchases, like a home or a car, but are unable to pay the full amount upfront. With EMI, you can spread out the loan amount into manageable monthly payments over a longer period.
EMI is favored because it allows people to budget their expenses effectively and offers more flexibility than alternatives like credit cards, with typically lower interest rates and extended repayment periods.
Before choosing EMI, it’s crucial to carefully review factors such as interest rates, processing fees, and potential prepayment charges. Depending on your financial situation, exploring alternatives such as personal loans, balance transfers, or credit card EMIs might also be beneficial. Doing thorough research and comparing different options can help you make an informed decision that suits your needs best.
Every time you pay your loan EMI on time, you get a point on your credit score and rations. Timely payment of your EMI amount means that you have high creditworthiness and lenders are not hesitant to offer you instant loans in the future.
How to Calculate EMI?
We are using this logic, An Equated Monthly Instalment (EMI) is usually a fixed amount of money that you need to pay your bank or lender every month as repayment of a loan taken, until your loan is totally repaid.
The formula to calculate an EMI:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
P =loan amount or Principal
R = Interest rate per month
[To calculate rate per month: if the interest rate per annum is 14%, the per month rate would be 14/(12 x 100)]
N = the number of installments
How to Calculate EMI?
Here are the steps you can follow to use an EMI Calculator:
Enter the loan amount: Enter the loan amount you wish to borrow from the lender. This is the total amount of money you will be borrowing from the lender.
Enter the loan tenure: Enter the number of months or years you would like to take to repay the loan. The loan tenure is the duration for which you will be paying the EMIs.
Enter the interest rate: Enter the interest rate that the lender is charging you on the loan amount.
Choose the EMI payment frequency: Choose the frequency of your EMI payments, which is typically monthly.
Click on ‘Calculate’: Once you have entered all the relevant details, click on the ‘Calculate’ button to generate the EMI amount.
View the EMI amount: The EMI Calculator will display the monthly EMI amount that you will be required to pay to the lender. It will also provide a detailed breakdown of the principal and interest components of each EMI payment.
By using an EMI Calculator, you can get a clear idea of the amount you need to pay each month and the total interest payable over the loan tenure. This will help you plan your finances better and make an informed decision about taking a loan.
