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What is the meaning of EMI?

EMI is an acronym for Equated Monthly Instalment. When you avail a loan from any bank or financial institution, the EMI is the amount that you repay the lender each month. It consists of a principal component and the interest thereon. Generally, the EMI amount remains fixed over the entire repayment tenure.

When is my EMI due?
The exact dates when your EMI is due depends on the terms and conditions of the loan that you have availed. Broadly speaking, however, EMIs are generally due on a predetermined date each month. The lender notifies you about this date when they disburse the funds to you. It’s important to ensure that you make your EMI payments on time, in order to avoid being charged any penalties or late fees.

How do I calculate my EMI?

The mathematical formula for calculating EMI is as follows:

EMI = [P x R x (1+R)N]/[(1+R)N-1]

Here, P refers to the loan amount or the principal. R is the rate of interest per month. N is the number of monthly instalments.

Calculating the amount due each month can be difficult if you do it manually. This is where an EMI calculator can prove to be extremely useful. You just need to feed in the necessary details, and the EMI calculator does all the tough computations for you.

What is the advantage of using an EMI calculator?

There are many advantages of using an EMI calculator. It is easy to access online, and it’s extremely simple to use. Even if you’re a beginner who is just getting to know the concept of EMIs, you will find the EMI calculator simple enough to use. It gives you quick results, and you can make use of the calculator to perform different calculations till you arrive at an EMI amount you’re comfortable with paying each month. In this manner, an EMI calculator also helps you with your financial planning.

How do I use an EMI calculator?

To use the EMI calculator, you simply need to enter the principal amount, the annual rate of interest and the loan tenure. The calculator will then automatically compute the EMI due each month. What’s more, it will even show you a breakup of the principal amount and the interest amount that make up the EMI.