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About EMI Calculator
Equated Monthly Installment – EMI for short – has become synonymous with living the “Good Life”, by making otherwise difficult acquisition of expensive assets easy, based on establishing the future purchasing power today as per a person’s current earnings.
Be it a house, car, jewellery education, or even a smart phone, all of it can be acquired through the facility of EMI. The EMI for a specific purchase is the amount payable every month to the lender (bank or any other financial institution) until the loan amount is paid for in full. The EMI consists of the interest on loan as well as part of the principal amount to be repaid monthly. The sum of principal amount and interest is divided by the tenured months in which the loan has to be repaid. The interest component of the EMI is larger during the initial months and gradually reduces with each payment. The exact percentage allocated towards payment of the principal depends on the rate of interest charged. Even though the monthly EMI payments don’t change, the proportion of principal and interest components will change with time. With each successive payment, the amount allocated towards the principal increases and interest decreases.
The formula applied to calculate EMI:
- E is the EMI
- P is the Principal Loan Amount
- R is the rate of interest calculated on monthly basis. (i.e., r = Rate of Annual interest (12/100). If rate of interest is 10.5% per annum, then r = 10.5/12/100=0.00875)
- N is the term / tenure / duration in number of months over which the loan has to be settled.
Computing the EMI for different combinations of principal loan amount, interest rates and loan term using the above EMI formula manually is a tedious and at times erroneous process.
Using the online EMI Calculator
Key in or use the slide bar to input the following information in the Loan EMI Calculator to compute the loan eligibility:
- Principal Amount Borrowed
- Borrowing period Tenure (years)
- Interest Rate on the Borrowing (percentage)
The calculator will compute the monthly out go as well as display the total interest that would be charged over the loan period both numerically and graphically in an easy to read pie-chart.
TIP - Retail banking having become a big revenue generator for banks and lending institutions, it has become much simpler to borrow without much effort or documentation. While it is tempting to borrow extra cash and splurge it over a vacation, jewellery or lifestyle goods, most loans offered with EMIs come with a very high in built interest rate. Unless acquiring capital or essential assets it is prudent to keep borrowings low at all times. The better way is to defer expenses and build a corpus through an investment plan to buy cheaper and better than what can be afforded now with an EMI.