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. It includes both principal and interest components.

2. How Does the EMI Calculator Work?

The calculator uses the standard EMI formula:

Where:

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

Explanation: The formula calculates the fixed monthly payment required to fully repay a loan over its term, accounting for compound interest.

3. Importance of EMI Calculation

Details: Calculating EMI helps borrowers understand their repayment obligations, plan their finances, and compare different loan options before committing.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What's included in an EMI payment?
A: Each EMI payment includes both principal repayment and interest charges for that month.

Q2: How does loan term affect EMI?
A: Longer terms reduce EMI but increase total interest paid. Shorter terms increase EMI but reduce total interest.

Q3: What is prepayment and how does it affect EMI?
A: Prepayment reduces principal, which can either reduce EMI or loan term, depending on the lender's policies.

Q4: Are there different types of EMI calculations?
A: Most loans use reducing balance method (shown here). Flat interest rate loans use a different calculation.

Q5: Does EMI remain constant throughout the loan term?
A: Yes, for fixed-rate loans. For floating-rate loans, EMI may change with interest rate fluctuations.