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:

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

Explanation: The formula calculates the fixed payment amount required each month to pay off a loan with interest 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 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 happens if I pay more than the EMI?
A: Paying more than the EMI can reduce your loan term and total interest paid, unless you have a prepayment penalty.

Q2: Does EMI remain constant throughout the loan term?
A: Yes, for fixed-rate loans the EMI remains constant. For adjustable-rate loans, it may change when interest rates change.

Q3: What's the difference between reducing balance and flat interest rate?
A: This calculator uses reducing balance method where interest is calculated on outstanding principal. Flat rate calculates interest on original principal for entire term.

Q4: How does loan term affect EMI?
A: Longer terms reduce EMI but increase total interest paid. Shorter terms increase EMI but reduce total interest.

Q5: Are there other costs besides EMI?
A: Yes, loans may have processing fees, insurance, or other charges not included in EMI calculation.