1. What is EMI?

EMI (Equated Monthly Installment) is the fixed payment amount a borrower makes to a lender at a specified date each calendar month. It includes both principal and interest components.

2. How Does the Calculator Work?

The calculator uses the standard EMI formula:

Where:

• \( P \) — Loan principal amount ($)
• \( r \) — Monthly interest rate (annual rate ÷ 12 ÷ 100)
• \( n \) — Loan term in months

Explanation: The formula calculates the fixed monthly payment that would pay off the loan with interest over the specified term.

3. Understanding Loan Components

Details: Each EMI payment consists of both principal repayment and interest. Early in the loan, most of the payment goes toward interest; later, more goes toward principal.

4. Using the Calculator

Tips: Enter loan amount in dollars, annual interest rate in percentage, and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does loan term affect EMI?
A: Longer terms reduce monthly EMI but increase total interest paid. Shorter terms mean higher EMIs but less total interest.

Q2: What's the difference between flat and reducing balance rates?
A: This calculator uses reducing balance method (interest calculated on outstanding principal). Flat rate calculates interest on full principal for entire term.

Q3: Are there other costs not included in EMI?
A: Yes, insurance, processing fees, and other charges may apply but aren't included in this calculation.

Q4: How can I reduce my EMI payments?
A: You can reduce EMI by increasing loan term, reducing principal (larger down payment), or securing a lower interest rate.

Q5: What happens if I make prepayments?
A: Prepayments reduce principal outstanding, which can either reduce EMI or loan term, depending on agreement with lender.