## What is an EMI?

**EMI is the acronym for the phrase Equated Monthly Instalment**. EMI is an amount that is paid by a borrower to a lender towards loan. EMIs are a popular method of paying off different types of loans. These loans may includes personal loans, home loans, travel loans, vehicle loans, business loans, mortgage loans, eduction loans, etc.

EMIs are fixed and paid over the course of time or tenure by a borrower to return a loan amount. This fixed amount accounts for a part of the interest and principal that is repaid every month, normally, by a fixed date. These fixed periodic payments are calculated by adding the accumulated interest to the principal divided by the number of months in the tenure of the loan as per a formula based on reducing principal. EMIs are quite different from variable payments where the borrower has the freedom to pay the lender an amount greater than the one specified.

EMIs also known as fixed mortgages in some countries and became popular method of borrowing. An EMI allows a loan borrower to have a fixed monthly payoff allowing him/her to budget their personal finance better. Now a days, Banks offer EMI facility on all types of loans and even on Credit Cards.

### Types of EMI

The main types of EMI are:

**Flat Rate EMI**– It is calculated on the whole loan amount with addition of interest for entire loan duration. The sum of the Principle amount and Interest amount will be divided by number of months to calculate the EMI.**Monthly Reducing EMI**– Monthly reducing EMI rates are different from Flat Rate EMI. These EMIs Calculated on the principal balance amount outstanding each month.

### How is an EMI calculated?

EMIs are normally calculated for a loan based on the principal amount, rate of interest and duration of loan repayment. If the principal is fixed then,

**Interest Rate**: Higher the rate of interest, higher the EMI and inversely**Tenure (Repaying Period)**: Lower the tenure, higher the EMI

So the formula that calculates EMI will be:

**EMI = (Principal Amount * Rate of Interest * (1 + Rate of Interest) ^{n}/((1 + Rate of Interest)^{n} – 1)**

Where Principal Amount is the **Loan Amount**, Rate of Interest is **the hundredth decimal of the provided Rate of Interest further divided by 12 (months in a year)** and n is the **amount of Tenure (Repaying Period) in months**.

So if you take a loan of 500,000 with a rate of interest of 12% and a tenure of 60 months then the EMI for the loan will amount to an EMI of 11,122. Any variations and changes in the interest rate or the tenure will similarly affect the EMI and a borrower needs to take all the scenarios into consideration before settling on a deal best suited to him/her.

Different banks might also have their own options on their lending policies and it is always a good thought to check with them first through an agent to decide the best EMI option. These options might also vary based on the kind of loan sought from a bank.

### Factors Affecting a Loan EMI

The main affecting factors for the loan EMIs are:

- Salaried Person, Self- Employed Professional or a Businessman
- Income per month
- Age
- Self and Co-applicant’s Qualifications
- Number of total dependants
- Co-Applicants Income (wife/mother/father, etc)
- Assets, Liabilities, and Stability
- Continuity of Occupation of the borrower
- Savings and Savings History
- Credit Score

## What is an EMI Calculator?

An EMI calculator is a simple and efficient tool for you to calculate your monthly repayment amount for any sort of loan. It helps you to compare and manage your finances in terms of interest rates, tenures and principal amount. EMI calculators have now evolved beyond this simple functions to calculate the monthly repayment amount (EMI), it help you to find out more.

### Why do you need an EMI Calculator?

- Compare the details of loan to calculate your loan eligibility
- Explore the options presented by banks/lenders according to your financial situation
- Obtain the best case scenario for your loan request from the options presented

#### Example

To provide an example if Mr. Charlie wants to seek a personal loan, he can approach, let us assume, an ICICI bank, HDFC bank and AXIS bank. He can contact them and explore his eligibility as well as the interest he needs to pay for a specific principal and tenure. Now let us also assume that Mr. Charlie is flexible and has three choices of principal as well as three choices of tenure to find out a best EMI amount. If so, then he will have to make several enquiries taking into account three choice scenarios for principal, tenure and banks. An EMI calculator completely skips these unnecessary steps by quickly checking every scenario within seconds whether on a website or through an app.

Now if we look at a more complicated case where Mr. Charlie has a set salary, working in a recognized/ unrecognized company, having a set of existing liabilities and other factors. He also wants to check across, let us assume, the above mentioned banks as well as IndusInd, Kotak Mahindra, Citibank, HSBC, Standard Chartered as well as lenders like Fullerton, Bajaj Finserv and Tata Capital. Now he has a scenario set stretching into dozens of options. An EMI calculator effectively removes all the confusion by presenting the best possible options across these banks as per the exact requirement of Mr. Charlie.

All in all a better and more efficient system of exploring options for obtaining a loan and choosing the best as per your requirement.

### How does this Loan EMI Calculator work?

Why remember complex formulas to calculate your EMI when our EMI calculator is right here. Our EMIcalculator helps calculate your monthly EMI that primarily based on rate of interest and your loan term/tenure/duration. The key inputs to the EMI calculator are,

- Principal amount or the Loan amount
- Tenure or Repayment Duration (in years or months)
- Rate of Interest (ROI)
- EMI in Advance or Arrears (applicable for Vehicle Loans only)

The calculator is available for Personal Loans, Home Loans and Vehicle loan. However, in general the loan calculator can calculate any loan type like an education loan, consumer loan, etc. This calculator will show the breakdown of loans in EMI. It also illustrate the principal and interest paid each month separately in a table.

### Types of EMI Calculator

#### 1. Personal Loan Calculator

This captures key inputs like the loan amount, rate of interest and the repayment tenure. Usually the Interest rate of loan is calculated on a reducing balance. In other words, interest is calculated only on the outstanding principal amount. The tenure for most banks varies from 2 years to 5 years. Changing any of the inputs will quickly help you calculate your monthly outflow.

#### 2. Home Loan Calculator

This is very similar to a personal loan except the tenure and the rate of interest varies. For a home loan the rate of interest is usually lower and the tenure or the repayment period is longer. The interest rate is usually lower because it is a secured loan vis-à-vis a personal loan which does not require any collateral.

#### 3. Vehicle Loan Calculator

In comparison to a home & personal loan, there is an additional input that is required for a car or bike loan. Which indicates whether the EMI is paid either in advance or in arrears.

### EMI Calculator Chart & Repayment Table

An EMI chart indicating details like Loan amount, Interest Rate, Loan Tenure & Total Monthly EMI amount. The EMI schedule table shows the following details:

- Monthly repayments for the entire loan duration
- Principal amount for that month
- Interest paid for that month
- Total interest paid till that month
- Balance amount

**Note**: During the initial loan period, a large portion of each EMI is repaid towards interest. However with the time, more significant portion pays down the principal amount.

### Benefits of using a Loan Calculator

The main benefit of using a loan calculator is, it is easy to use and gives error-free calculations. EMI calculation with formula is a time-consuming and error-prone process. So, using an online loan calculator is the best idea. Our Loan calculator can help in EMI calculation and gives a lot of useful information displayed in a chart/table.

## EMI Calculator FAQs

**What is the meaning of EMI?**The definition of EMI is **Equated Monthly Instalment**. **Equated Monthly Instalment**, or **EMI** in short. EMI is the amount payable every month to the bank until the loan amount is fully repaid.

**How is Loan Interest and EMI Calculated?**The mathematical formula for **calculating** EMIs is – **EMI** = [P x R x (1+R)^N]/[(1+R)^N-1]. Where – **E** is EMI, **P** is Principal Loan Amount, **r** is the rate of interest calculated every month, and **n** is loan duration in months.

**What is the difference between EMI in advance and EMI in arrear?**In the normal **EMI** schemes (also called EMI in arrears), a loan amount will be transferred to the loan borrower. Further, the **EMI** of a fixed amount will start from the end of the first month. On other hand, in the advance EMI scheme, the first month EMI would be deducted from the amount disbursed, and the remaining will be paid afterward.

**Can I pay advance EMI before the due date?**Yes, you can pay your EMI before the due date but you have to check with your bank. Most of the bank and lenders accept EMIs before the due date.