Total Interest Payable
(Principal + Interest)
What is EMI?
Equated Monthly Instalment or EMI is the fixed amount a borrower pays every month towards the repayment of their loan. It has two components - the principal and the interest- and is usually paid on a fixed date every month.
How to use the EMI calculator?
You can use an EMI calculator to arrive at your EMI amount for your personal loan, home loan or even car loan. All you have to do is insert your loan amount, tenure and the rate of interest on the loan. It then gives you the EMI amount along with the total interest payable.
How are EMIs calculated on loans with a floating interest rate?
A floating interest rate, in contrast to a fixed rate, varies based on the prevailing market rates. It is usually synced with the base rate determined by the RBI. For some banks, changes in interest rates don’t reflect in your EMI, rather the tenure of the loan may increase or decrease accordingly.
What is the importance of an EMI Calculator?
With an EMI calculator, you can find out the following within seconds:
- Your Equated Monthly Instalment amount
- The total interest payable on your loan
- The total amount you have to repay (principal + interest), i.e., the total cost of your loan
You can customize the loan tenure or change the loan amount to arrive at the EMI that you can afford. Additionally, as interest rates affect EMIs, you can compare rates to find the one that best suits your needs.
How do EMI Calculators work?
The formula for calculating EMIs is:
EMI = p × r × (1 + r)n/((1 + r)n - 1)
- P = loan amount
- r = rate of interest
- n = loan tenure in months
To determine your EMI amount, enter the loan amount that you wish to borrow, the loan tenure within which you intend to repay the money, and the interest rate that your borrower charges.
What are the types of EMI Calculators?
There are three types of EMI Calculators:
- Home Loan EMI Calculator: It is used to calculate a home loan EMI. For instance: If you take a home loan of Rs 20 lakh for a tenure of 20 years, at an interest rate
of 10.5%, entering these values will show you that your EMI amount will be Rs 19,968.
- Personal Loan EMI Calculator: You can use it to find out your personal loan EMI. Consider, you borrow Rs 5 lakh for your personal expenses at an interest rate of 10.5% and decide to repay it within 5 years.
The calculator will show you that your monthly liability will be Rs 10,747.
- Car Loan EMI Calculator: This tool lets you determine your car loan EMI. Example: You take a car loan amounting to Rs 8 lakh and the lender charges an interest rate of 8.9%. Using the calculator, you can find
out that for a repayment tenure of 8 years, your EMI will amount to Rs 11,679.
What are the factors that can impact your EMI amount?
- Higher interest rates and loan amounts increase your EMI amount.
- Longer repayment tenures lower your EMI amount but increase the total interest payable.
- A partial prepayment of loan lowers your principal amount on which the interest is to be paid, thus, reducing your EMI amount.
- A flexible EMI scheme allows you to adjust the EMI amount as per your convenience.
1) What happens in the case where the interest rate reduces or increases during the tenure of your loan?
For a floating plan, the EMI varies with changes in market rates. You pay more when the market rates soar and end up saving when they take a dip. Many banks make adjustments in a way that keeps the EMI constant with the tenure of the loan fluctuating.
2) What happens when you partially prepay the loan?
If you want to become debt-free as soon as possible, you have the option of prepaying your loan amount partially or fully. Although repaying your loan early reduces your future EMI payments, banks may stipulate a time period before which the prepayment cannot be initiated and may even charge a prepayment penalty.
3) What happens if you skip your EMI?
If you default on your EMI, the bank charges a late payment fee. Also, your EMIs may tend to be more in the future. Moreover, your credit score might take a hit; so, it is better to plan your finances right.