EMI Calculator
Easily calculate monthly EMI, interest costs, and repayment schedules for personal, home, and car loans.
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Insights & Questions
Everything you need to know about EMI calculations.
EMI stands for Equated Monthly Installment. It is a fixed amount paid by a borrower to a lender at a specified date each calendar month. EMIs are used to pay off both interest and principal each month so that over a specified number of years, the loan is paid off in full.
EMI is calculated using the formula: E = P x r x (1+r)^n / ((1+r)^n - 1), where P is the principal amount, r is the monthly interest rate, and n is the loan tenure in months.
Increasing the loan duration (tenure) reduces the monthly EMI amount, making it more affordable in the short term. However, it significantly increases the total interest you will pay over the life of the loan.
In the reducing balance method, interest is calculated on the outstanding principal at the end of each month. As you pay back the principal through EMIs, the interest component decreases over time.
If your monthly budget allowed, choosing a lower tenure (higher EMI) is always better as it reduces the total interest cost. However, you should ensure the EMI does not exceed 35-40% of your take-home pay.
Most banks allow you to choose either. Reducing the tenure while keeping the same EMI is financially more beneficial as it saves more interest compared to reducing the EMI amount.