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 Calculation Work?

The calculator uses the EMI formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (annual rate divided by 12)
• \( n \) — Number of monthly installments (loan term in years × 12)
• \( PMT \) — Monthly payment amount (USD)

Explanation: The formula calculates the fixed monthly payment that will pay off the loan with interest over the specified term.

3. Understanding the Amortization Table

Details: The amortization table shows the breakdown of each payment into principal and interest components, and how the loan balance decreases over time.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate in percentage, and loan term in years. The calculator will show the monthly payment and generate a detailed amortization schedule.

5. Frequently Asked Questions (FAQ)

Q1: Why does early EMI have more interest than principal?
A: In the beginning, the outstanding balance is highest, so interest constitutes a larger portion of the EMI. As the balance reduces, the interest portion decreases.

Q2: How can I reduce my total interest payment?
A: You can reduce total interest by choosing a shorter loan term or making prepayments to reduce the principal amount.

Q3: What happens if I make extra payments?
A: Extra payments directly reduce the principal, which can shorten the loan term and reduce total interest paid.

Q4: How does interest rate affect EMI?
A: Higher interest rates increase both the EMI amount and total interest paid over the loan term.

Q5: Can I change my EMI amount during the loan term?
A: Typically, EMI remains fixed for fixed-rate loans. For floating-rate loans, EMI may change if interest rates change.