1. What is Loan 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:

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

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

3. Importance of EMI Calculation

Details: Understanding your EMI helps in financial planning, comparing loan offers, and ensuring the monthly payment fits within your budget before committing to a loan.

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. Some lenders charge prepayment penalties.

Q4: Are there different types of EMI calculations?
A: Yes, some loans use flat interest rate or reducing balance methods, but this calculator uses the standard reducing balance method.

Q5: Can EMI change during the loan term?
A: Fixed-rate loans maintain the same EMI, while floating-rate loans may change EMI if interest rates change.