An EMI (Equated Monthly Installment) Calculator helps users estimate the monthly payment they need to make for a loan. It provides a clear view of how much of the EMI goes toward repaying the principal amount and how much goes toward the interest. Below is an in-depth guide to the components and functionality of an EMI calculator.
The EMI is calculated based on the following three parameters:
Principal Amount (P): The total loan amount borrowed. Example: ₹500,000
Interest Rate (R): The annual interest rate charged by the lender, which is later converted into a monthly interest rate for the calculation. Example: 8% annually.
Loan Tenure (N): The duration of the loan, which is usually expressed in months or years. Example: 5 years or 60 months.
Clarity on Monthly Outflows helps users determine their monthly budget and financial commitment.
Users can compare various loan offers from different lenders by adjusting the interest rates, loan amount, and tenure.
By understanding the total interest payable, users can make informed decisions about whether to choose a longer tenure with smaller EMIs or a shorter tenure with higher EMIs but lower overall interest.
Users can simulate different prepayment scenarios to see how much they can save on interest.