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 time, the loan is paid off in full.

2. How Does the Calculator Work?

The calculator uses the standard EMI formula:

Where:

• \( PMT \) — Monthly payment (EMI)
• \( P \) — Principal loan amount (INR)
• \( r \) — Monthly interest rate (annual rate divided by 12, in decimal)
• \( n \) — Loan term in months

Explanation: The formula calculates the fixed payment amount that includes both principal and interest components for each month of the loan term.

3. Understanding Loan Components

Details: A loan consists of three main components - principal amount, interest rate, and loan term. The EMI is calculated based on these three factors.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What factors affect my EMI amount?
A: EMI depends on three factors - loan amount, interest rate, and loan tenure. Higher loan amounts or interest rates increase EMI, while longer tenures reduce EMI.

Q2: Can I reduce my EMI amount?
A: Yes, by either negotiating a lower interest rate or opting for a longer repayment tenure, though the latter increases total interest paid.

Q3: What is prepayment and how does it affect my loan?
A: Prepayment is paying off part of the loan before the scheduled term. It reduces principal, potentially lowering total interest and sometimes EMI.

Q4: Are there any hidden charges in EMI calculation?
A: This calculator shows pure EMI based on principal and interest. Actual loans may include processing fees or insurance which aren't reflected here.

Q5: How often do banks compound interest for personal loans?
A: Most Indian banks, including Bank of India, use monthly compounding for personal loans.