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What is EMI?
EMI stands for equated monthly instalment. It is a fixed payment that you have to return to the bank on a specific date every calendar month. The purpose of making payment in terms of EMI is to clear a loan that you have taken from the bank.
With the help of EMI calculator, an individual can identify in advance exactly how much money he or she is going to require monthly to pay off a certain kind of loan.
There are two modes by which a borrower can calculate his/her EMI. Through mathematical formulas or automatically.
The formula of calculating EMI:
Loan buyers can calculate their EMI’s with the help of this mathematical formula.
EMI Amount = [P x R x (1+R)^N]/[(1+R)^N-1], where, P, R, and N is the variable, which means the EMI value can be changed if you change the values of these variables.
Let’s inform you about these three variables:
- P, Stands for the ‘Principal Amount’. The basic amount given to the person by the bank can be termed as a principal amount. The EMI would be calculated accordingly on the amount.
- R is the rate of interest (defined by the bank)
- N means the number of years for which a person has taken the loan. As you give EMI monthly so the value of NI should be entered in terms of months.
- If you buy a home loan of Rs. 50 lakhs with an average interest rate of 12%, the EMI will be:
- P = 50 lakhs, R = 12%, N = 10 years or 120 months
- EMI = [5000000 x 12/100 x (1+12)^120] / [(1+12/100)^120-1]
- EMI = Rs. 71735
How to use the Online EMI calculator?
The online EMI calculator is very simple to use. Just put the values of the principle, rates, and time. Based on the input, the calculator will show you the EMI that is payable. You can also recalculate your EMI by changing the input variables.
Factor affecting EMI:
There are several factors that affect EMI calculation. Since the calculation of the online calculator is depend on the principle, rate of interest and time. But, one should know that there are many other factors upon which the amount of loan can vary.
- Age
- Qualification.
- The number of dependents.
- Savings history.
- Co-applicants income.
- Assets and Liabilities.
Benefits of EMI calculator:
- Quick Calculation: If you calculate your EMI with pen and paper it takes a while. There is also a room for human error. However, with the help of the online EMI calculator, you will get the results with 100% accuracy.
- Convenience: Online calculator is very easy to use. One doesn’t have to be tech-savvy to use this calculator. In a matter of milliseconds, you will know how much EMI you have to pay to the bank and make home loan decisions easily.
Also, many online EMI calculators show the results in terms of graphs. The numerical data combined with the graphical representation of the calculation makes it easier to grasp nitty, gritty of the EMI.