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EMI Formula:
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EMI (Equated Monthly Installment) is a fixed payment amount made 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.
The calculator uses the standard EMI formula:
Where:
Explanation: This formula calculates the fixed monthly payment required to completely pay off a loan over its tenure, accounting for both principal and interest components.
Details: Accurate EMI calculation helps borrowers plan their finances, understand their repayment capacity, and compare different loan offers. It ensures transparency in understanding the total cost of borrowing.
Tips: Enter the principal amount in rupees, annual interest rate in percentage, and loan tenure in months. All values must be positive numbers with principal and rate greater than zero.
Q1: What factors affect EMI amount?
A: EMI depends on three main factors: principal amount, interest rate, and loan tenure. Higher principal or interest rate increases EMI, while longer tenure reduces EMI.
Q2: Can I prepay my loan?
A: Yes, most banks including Axis Bank allow prepayment, though some may charge a prepayment penalty. Prepayment reduces your total interest burden.
Q3: What is the difference between reducing balance and flat interest rate?
A: Reducing balance calculates interest on outstanding principal, while flat rate calculates interest on original principal throughout the tenure. EMI calculators typically use reducing balance method.
Q4: How does loan tenure affect total interest paid?
A: Longer tenure means smaller EMI but higher total interest paid over the loan period. Shorter tenure means higher EMI but lower total interest cost.
Q5: Are there any hidden charges in personal loans?
A: Apart from interest, personal loans may include processing fees, prepayment charges, late payment fees, and GST. Always read the terms carefully.