EMI Calculator - Calculate Your EMI for Home Loan, Personal Loan, Car Loan and all Other Loans

What is EMI?

The equated monthly instalment, or EMI in short, is the amount an individual pays to the bank or other financial institutions each month until the complete loan is paid. The EMI consists of the part of the principal amount that needs to be repaid and the interest on the total loan taken by an individual.

In simple terms, an EMI is the one part of the equally divided monthly amount that is given to clear off an outstanding loan within a stipulated time frame.

How is it calculated?

The total sum of the principal amount and interest is divided by the tenure of the loan payment, which is the number of months in which the loan amount has to be repaid by the individual.

The total EMI is dependent on several factors like principal borrowed sum; rate of interest; tenure of the loan period; and monthly/annual resting period.

It is to be noted that the interest component of the EMI remains larger during the initial months when an individual takes a loan and gradually it comes down with each payment. This means the first EMI will have the highest interest component and the lowest principal component. Once you keep on paying EMIs at regular intervals, the interest component keeps on reducing, while the principal component rises with time. As a result, the last EMI paid will have the highest principal component and the lowest interest component.

The interest rate determines the exact percentage allocated towards payment of the principal amount.

In the case of a fixed interest rate loan, the EMI shall remain fixed for the entire tenure of the loan, provided the user makes no default or part-payment in between the total loan period.

Usually, most of the calculators available online use the following formula - EMI = P X r X (1 + r)^n / ((1 + r)^n - 1).

Here, P stands for the principal amount, R for the rate of interest and N is the loan tenure.

Understanding EMI Calculator

The financial tool aids borrowers in estimating the monthly instalments they will be required to make throughout the loan. The EMI Calculator effectively and carefully takes into account the total loan amount, interest rate and repayment duration to compute the EMI amount. By providing these variables, the borrowers get a comprehensive understanding of their monthly financial commitments, which further helps them in facilitating improved financial planning and administration.

The public and private sector banks, lenders and other institutions provide their own online EMI calculator on their respective web portals as well as smartphone apps, which the borrowers can easily use from the comfort of their homes.

EMI calculator: Benefits

Regardless of the type of loan you intend to take — secured or unsecured — it is important for every individual to understand the total EMI you will pay every month before you apply for the same. This is the situation where the EMI calculator plays a major role for you and can be quite useful.

Here are some of the advantages of using an EMI Calculator:

The EMI calculator eliminates the chances of any miscalculation, provided the user mentions accurate estimates every time. It helps to determine the exact amount which the individual should pay over the given time frame. This will help you integrate your loan payments into your monthly budget more effectively.

Once you know your total EMI amount in advance, you can properly manage your expenses and savings.

Before applying for any loan, an EMI Calculator provides the option of evaluating various loan offers. This enables you to compare the different interest rates, loan amounts, and other details. When the comparison is done, the user will be able to select the most cost-effective and credible loan option that suits his/her financial situation.

This key financial tool helps you save valuable time as the user is no longer required to do complex calculations manually, which can be time-consuming. The EMI calculator quickly provides a detailed insight into your loan’s repayment structure. Ultimately, this efficiency will speed up the decision-making process and grant time to focus on other important aspects of financial planning.

An EMI calculator provides a comprehensive view of monthly payment commitments, which helps in lowering financial risk. Users can prevent taking on more debt than they can handle by knowing the precise amount of the monthly instalments and how they fit into the spending plan. This brings down the danger of default, ensuring financial stability by assisting people in making well-informed decisions and preventing overextension.