EMI Calculator is used to calculate the monthly payment amount due to the bank or other financial institution from the time the loan is taken until the entire amount is repaid. The EMI amount includes both the interest and principal on the loan, which will be paid monthly. The interest amount will be the majority of the EMI in the beginning, but the principal amount will gradually increase.
What is EMI Calculator?
The EMI Calculator is used to determine the monthly EMI amount payable to the bank or financial institution for the loan. EMI calculators are also referred to as loan repayment calculators and mortgage calculators. The EMI calculator computes the EMI amount based on three variables: loan amount, loan interest rate, and loan term. A mathematical formula is used to calculate the emi amount. The emi calculator will compute the emi amount assuming the loan interest rate remains constant throughout the loan period. The loan repayment summary and loan repayment schedule can be downloaded and printed using the emi calculator.
What is EMI Amount?
The EMI Amount is also known as the Equated Monthly Installment Amount. The EMI is the monthly payment for a loan from a bank or financial institution. The EMI is a fixed monthly payment made to repay the loan amount.The emi amount is made up of the loan principal and loan interest. The EMI is calculated by dividing the total loan amount and loan interest amount by the number of repayable months.
How is the EMI Amount Calculated?
The emi amount is calculated using the emi formula below. This emi formula is widely used in banks and financial institutions.
E = P X R X ( 1 + R)^N / ( (1 + R)^N – 1 )
OR
. ( 1 + R)^N
E = P X R X ——————-
. ( (1 + R)^N – 1 )
P – The amount borrowed from a bank or financial institution.
R – The loan interest rate expressed as a percentage. If the interest rate is 5.25 percent, the R value is (5.25/12/100). The R is calculated monthly. The annual interest will be divided by 12. By dividing by 100, the percentage will be converted to decimal.
N – The loan period is expressed in months. The N value is 60 months if the loan term is 5 years. (5 * 12 = 60)
Factors influencing EMI amount
Three factors will influence the emi amount. The three factors are the loan amount you borrowed from the bank or financial institution, the loan interest rate at which the loan interest amount is calculated, and the length of the loan term to repay the loan amount. The emi amount should not exceed 50% of your monthly earnings. Your emi amount should be calculated based on your monthly income.
Amount of the Loan
The loan amount is one of the factors used to calculate the EMI. The EMI will be higher if the loan amount is large. If the loan amount is less, you must pay less EMI. The loan amount should only be used for necessary expenditures.
Interest Rate on a Loan
The bank or financial institution determines the loan interest rate. The higher the interest rate, the greater the amount of interest that must be paid. The EMI amount will rise as well. The loan should be obtained from a bank or financial institution that offers low long-term interest rates. This reduces the EMI for the monthly repayment.
Loan Period
The emi amount is determined by the loan’s duration. The emi amount decreases as the duration increases. The emi amount will be higher for shorter-term loans. Based on your monthly income, you should pay a higher emi amount over a shorter period of time to avoid paying too much interest.