1. What is EMI?

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

2. How Does the EMI Calculation Work?

The calculator uses the standard EMI formula:

Where:

• \( P \) — Loan principal amount
• \( r \) — Monthly interest rate (annual rate divided by 12 and converted to decimal)
• \( n \) — Loan term in months

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

3. Importance of EMI Calculation

Details: Understanding your EMI helps in financial planning, comparing loan offers, and determining affordability before taking a home loan.

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: What affects my EMI amount?
A: EMI depends on three factors - loan amount, interest rate, and loan term. Higher loan amounts or interest rates increase EMI, while longer terms reduce EMI.

Q2: Should I choose a longer term to reduce EMI?
A: While longer terms reduce EMI, you pay more interest overall. Choose the shortest term you can comfortably afford.

Q3: How does prepayment affect my EMI?
A: Prepayment reduces principal, which can either reduce EMI or loan term. Some lenders allow re-casting the loan after prepayment.

Q4: Are there other charges besides EMI?
A: Yes, there may be processing fees, insurance, and other charges. EMI calculation only includes principal and interest.

Q5: Can EMI change during loan term?
A: For fixed-rate loans, EMI stays constant. For floating-rate loans, EMI may change when interest rates change.