EMI Calculator - Plan Your Loan Repayment
Equated Monthly Installment (EMI) is a fixed amount payable by a borrower to a lender at a specified date each calendar month. EMIs apply to both interest and principal each month so that over a specified number of years, the loan is paid off in full. Our EMI Calculator helps you calculate the exact monthly outflow for any type of loan.
How EMI Calculator Helps?
Before taking a loan—be it a personal loan, car loan, home loan, or education loan—it is crucial to know how much you will have to pay every month. An EMI Calculator helps you:
- Plan Your Budget: Knowing the EMI in advance helps you manage your monthly expenses better.
- Choose the Right Tenure: You can experiment with different time periods. A shorter tenure increases the EMI but saves interest cost, while a longer tenure reduces the EMI but increases the total interest payout.
- Compare Loan Offers: By inputting different interest rates offered by various banks, you can choose the most affordable option.
Formula Used for EMI Calculation
The standard mathematical formula for EMI calculation is:
E = P × r × (1 + r)^n / ((1 + r)^n - 1)
- E = EMI Amount
- P = Principal Loan Amount
- r = Monthly Interest Rate (Annual Rate / 12 / 100)
- n = Loan Tenure in Months
Factors Affecting Your EMI
- Loan Amount: A higher loan amount results in a higher EMI.
- Interest Rate: A lower interest rate reduces your EMI burden. Rates depend on your credit score, income, and the type of loan.
- Loan Tenure: Choosing a longer tenure lowers your monthly EMI but increases the total interest you pay over the life of the loan.
Reducing Balance vs Flat Rate EMI
It's important to know how your bank calculates interest. Most banks use the Reducing Balance Method, where interest is charged only on the outstanding principal. Some lenders may quote a Flat Rate, where interest is charged on the full principal throughout the tenure. Always prefer the Reducing Balance method as it is cheaper.
Frequently Asked Questions (FAQs)
What happens if I miss an EMI payment?
Missing an EMI payment can negatively impact your credit score (CIBIL). Banks may also charge a late payment fee and penal interest on the overdue amount.
Can I change my EMI date?
Yes, most banks allow you to change the EMI due date upon request, though some administrative charges may apply.
Does prepayment reduce EMI or Tenure?
When you make a partial prepayment, the outstanding principal reduces. You can choose to either reduce your monthly EMI amount (keeping tenure same) or reduce the loan tenure (keeping EMI same). Reducing tenure saves more interest.
Is EMI applicable on credit card purchases?
Yes, you can convert high-value credit card transactions into EMIs. However, check for processing fees and the interest rate charged by the bank, as it is usually higher than personal loans.
What is a Moratorium Period?
A moratorium is a holiday period during the loan term when you are not required to pay EMIs. This is common in education loans where repayment starts after the course completion. However, interest continues to accrue during this period.
Disclaimer: This EMI Calculator is provided for general information and estimation purposes only. The results are based on the standard reducing balance formula. Actual bank calculations may differ slightly due to processing fees, taxes, or different interest compounding methods.
