1. What is the Home Loan EMI Formula?

The home loan EMI (Equated Monthly Installment) is calculated using the formula:

Where:

• \( PMT \) — Monthly payment (EMI)
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Loan term in months

2. How Does Prepayment Affect EMI?

Explanation: Prepayment reduces the principal amount, which in turn reduces the monthly EMI. The same formula is applied to the reduced principal amount to calculate the new EMI.

3. Importance of EMI Calculation

Details: Understanding your EMI helps in financial planning and assessing loan affordability. Prepayment can significantly reduce your monthly burden or loan tenure.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate, loan term in years, and optional prepayment amount. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does prepayment affect loan tenure?
A: Prepayment can either reduce your EMI while keeping the tenure same, or reduce the tenure while keeping EMI same, depending on your bank's policy.

Q2: Are there prepayment penalties?
A: Some lenders charge prepayment penalties, especially during the initial years of the loan. Check with your lender.

Q3: Should I prepay my home loan?
A: It depends on your financial situation and whether you can earn higher returns by investing elsewhere compared to your loan interest rate.

Q4: How often can I make prepayments?
A: This varies by lender. Some allow unlimited prepayments while others have restrictions.

Q5: Does prepayment affect credit score?
A: No, prepayment doesn't directly affect your credit score, but it demonstrates responsible credit behavior.