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 a specified number of years, 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 (years × 12)
• \( PMT \) — Monthly EMI payment (USD)

Explanation: The formula calculates the fixed payment amount that includes both principal and interest components each month.

3. Importance of EMI Calculation

Details: Understanding your EMI helps in financial planning, budgeting, and choosing the right loan amount and tenure that fits your monthly income and expenses.

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?
A: EMI depends on three factors - loan amount, interest rate, and loan tenure. Higher loan amounts or interest rates increase EMI, while longer tenures reduce EMI.

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: How does prepayment affect EMI?
A: Prepayment can either reduce your EMI or shorten your loan tenure, depending on the terms of your loan agreement.

Q4: What is the difference between reducing balance and flat interest rate?
A: In reducing balance, interest is calculated on the outstanding principal, while flat rate calculates interest on the full loan amount throughout the tenure.

Q5: Are there any other charges besides EMI?
A: There may be processing fees, prepayment charges, late payment fees, etc. which are not included in the EMI calculation.