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 Calculator Work?

The calculator uses the standard EMI formula:

Where:

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

Explanation: The formula calculates the fixed monthly payment that would pay off the loan over its term, including both principal and interest.

3. Importance of EMI Calculation

Details: Understanding your EMI helps in financial planning, budgeting, and comparing different loan options before committing to a home 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 factors affect my EMI?
A: EMI depends on three main factors - loan amount, interest rate, and loan term. Higher amounts or rates increase EMI, while longer terms reduce EMI.

Q2: How does prepayment affect my EMI?
A: Prepayment reduces your principal, which can either lower your EMI or shorten your loan term, depending on the terms of your loan agreement.

Q3: What's the difference between reducing balance and flat interest rate?
A: Reducing balance calculates interest on the outstanding principal, while flat rate calculates interest on the original principal for the entire term.

Q4: How much of my EMI goes toward principal vs interest?
A: Initially, more goes toward interest. As the loan matures, more goes toward principal. This is called amortization.

Q5: Can I change my EMI during the loan term?
A: Some lenders offer EMI step-up/step-down options, but standard fixed-rate loans maintain the same EMI throughout the term.