1. What is the EMI Formula?

The EMI (Equated Monthly Installment) formula calculates the fixed payment amount made by a borrower to a lender at a specified date each calendar month. It's used for home loans, car loans, and other installment loans.

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)
• \( n \) — Number of monthly payments (loan term in years × 12)
• \( PMT \) — Monthly payment amount (USD)

Explanation: The formula accounts for both principal repayment and interest payment in each installment over the loan term.

3. Importance of EMI Calculation

Details: Calculating EMI helps borrowers understand their monthly financial commitment, compare loan offers, and plan their finances accordingly.

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 EMI amount?
A: EMI depends on principal amount, interest rate, and loan term. Higher principal/rates increase EMI, while longer terms reduce EMI but increase total interest.

Q2: Can EMI change during the loan term?
A: For fixed-rate loans, EMI remains constant. For floating-rate loans, EMI may change when interest rates change.

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

Q4: How does prepayment affect EMI?
A: Prepayment reduces principal, which can either reduce EMI or loan term depending on the prepayment option chosen.

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