EMI Calculator

Lending is an age-old process that provides the required funds to the potential borrower. The conditions are that the borrower has to repay the loan amount at a rate of interest and within a fixed period. Now, repaying the whole amount at once creates a huge burden on the borrowers. Hence, EMIs take the responsibility to divide those burdens into easy equated monthly installmentsthat a borrower has to pay each month of the tenure. Nowadays, an EMI calculator efficiently does the calculation in a blink to provide a perspective of the possible financial responsibility. Read on to make your perception clear about a loan EMI calculator.

What is a Loan EMI Calculator?

An EMI is a monthly payable portion of loan repayment. Borrowers use to consider EMI as a vital factor before taking up a loan. Because it creates an effect on their monthly budget and they have to judge their financial ability to repay the loan without any glitch. Thus EMI calculation is compulsory for the borrowers before borrowing funds from the lenders. And a loan EMI calculator can help them. A loan EMI calculator is a financial instrument that online lenders and credit platforms offer to borrowers free of cost. No matter what kind of loan you’re going to apply for, an EMI calculator can calculate when you put loan amount, tenure, and rate of interest (ROI) in the calculator. The instant and accurate EMI calculation saves time and helps to alter your monthly budget to get the loan that you need.

How are Loan EMIs Calculated?

When you pay an EMI, you’re repaying a part of the principal along with some interest. That interest can be at a fixed rate or a floating rate. Unlike fixed ROI, floating ROI keeps changing from time to time. And your EMI will also keep fluctuating. But the formula to calculate the EMI is constant which is EMI=[PxRx(1+R)N]/[ (1+R)N-1]. Here you should know the vital components that construct this formula, such as P or principal, R or ROI, and N or tenure.

• For example, if you borrow Rs. 2,00,000 for 2 years at 20% ROI p.a., then as per the formula
• P= 2,00,000
• N= 2 year= (12x2) months= 24 months
• R= 20% p.a.= 20/12= 1.66% p.m.
• So, the EMI will be [PxRx(1+R)N]/[ (1+R)N-1]
  =[2,00,000x1.66/100x(1+1.66/100)24]/ [(1+1.66/100)24-1]
  =Rs. 10,179.16
• The whole calculation can be time consuming but not for an online EMI calculator. It can calculate any amount easily.

How an EMI Calculator Works?

The EMI calculation process of an EMI calculator requires the basic yet variable components such as loan amount, rate of interest, and tenure. And the EMI will be different depending on these components.

• Loan Amount

  Also referred to as principal, the loan amount is the base on which your interest will be payable. Irrespective of the loan type, your EMI will keep increasing during the calculation if you opt for a higher amount.

• Rate of Interest (ROI)

  The interest you’re going to pay also depends on the ROI you’re opting for or the lender is going to apply. This can be different for different loans and lenders. Besides, the types of interest such as floating or variable can also make a huge difference in the EMIs.

• Tenure

  Depending on the type of loan you’re applying for, your tenure will vary. It also depends on the lender and the amount you’re asking for. Besides, the ROI also has connections with tenure. An EMI calculator, can deal with all of these variable components and show you the exact result of the calculation.