EMI Calculator : Equated Monthly Installment
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How to use EMI Calculator :
- Enter the loan amount in Indian Rupees (INR) in the “Loan Amount” field.
- Enter the annual interest rate in percentage in the “Rate of Interest” field. (Up to 2 decimal places)
- Enter the loan period in the “Loan Period” field.
- Choose the period type (Years or Months) from the dropdown menu.
- Click the “Calculate EMI” button. The calculator will compute the Monthly Payment (EMI), the number of payments, interest paid, and total amount paid.
- The results will be displayed below the input form.
- A doughnut chart will be generated to visually represent the loan amount and interest paid.
- To perform another calculation, you can either enter new loan details and click “Calculate EMI” again, or you can click the “Reset” button to clear the inputs and chart for the next operation.
EMI Calculator
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Equated Monthly Installment (EMI):
An Equated Monthly Installment, commonly known as EMI, is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. EMIs are commonly used to repay both the principal amount and interest on a loan, such as a home loan, car loan, or personal loan. The EMI remains constant throughout the loan tenure, making it easier for borrowers to plan their monthly budgets.
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Significance of EMI:
The significance of EMI lies in its role as a predictable and structured method of repaying loans. It provides borrowers with a clear understanding of their financial commitments, enabling them to plan their monthly expenses effectively. The fixed nature of EMIs simplifies budgeting and ensures that borrowers can meet their repayment obligations consistently over the loan term.
The formula for Calculating EMI :
The formula for calculating EMI involves the loan amount, interest rate, and loan tenure. One commonly used formula is:
EMI=P×r×(1+r)^n /(1+r)^n − 1
where:
- P is the principal loan amount,
- r is the monthly interest rate (annual rate divided by 12 and expressed as a decimal),
- n is the total number of monthly payments.
This formula helps in determining the fixed monthly installment that a borrower needs to pay.
Uses of Knowing EMI:
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Financial Planning: Knowing the EMI helps individuals plan their finances by understanding the monthly outflow toward loan repayment. It assists in budgeting and prevents financial strain.
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Loan Comparison: Understanding EMI allows borrowers to compare loan offers from different lenders. It helps in selecting a loan that aligns with the borrower’s financial capacity and requirements.
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Timely Repayment: Knowledge of EMI promotes timely repayment, avoiding defaults and ensuring a positive credit history. Timely payments contribute to a good credit score.
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Long-term Commitment: EMI reflects a long-term financial commitment. Knowing the EMI enables individuals to assess their financial capacity before committing to a loan and helps avoid over-borrowing.
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Loan Prepayment Planning: If borrowers have the means to prepay a loan, knowing the EMI aids in understanding the impact of prepayments on the overall loan tenure and interest paid.
In essence, understanding EMI is crucial for responsible financial management and informed decision-making when it comes to taking loans.
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