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What is EMI
A loan is a financial agreement between two parties, a lender and a borrower. Under this agreement, the lender gives a specific amount of money to the borrower with the intent that the amount borrowed needs to be paid back with interest as monthly installments over a predetermined period of time by the borrower. Using an EMI calculator is the easiest way to determine your monthly payouts and balance your budget accordingly. Everyone has to borrow a loan at some point of time in their life whether for buying a car or house, funding child’s education or consolidating debts, etc. Thus, loans have become an important part of everyone’s life in today’s times. Loans can be availed for various purposes, but the key components on loans are always the same, namely – loan amount, loan tenure and interest rates.
What is an EMI Calculator?
EMI is the payment which the borrower makes every month towards loan repayment of the loan. EMI constitutes the principal amount along with the accrued interest. You can use the EMI calculator to calculate your monthly loan EMI payouts. The borrower just needs to enter the variables of the loan such as the principal amount, tenure and interest rate and it instantly fetches an result which is the EMI. Calculating EMI using online EMI calculator is easy as you need to enter the details and just wait for a few seconds to know your loan EMI. Paisabazaar’s online loan EMI calculators are available 24*7 without any cost! So calculate or compare various loan EMIs any number of times you wish to for free. Whenever we talk about loans, one of the first thing that crosses the mind is EMI. The abbreviation, EMI stands for Equated Monthly Installment. An equated monthly installment (EMI) is the amount that a loan borrower pays every month in order to repay the money borrowed. There is a particular date each calendar month by which the EMI should be paid by the borrower. The loan amount plus the accrued interest is divided equally over a period which is the loan tenure and you can easily calculate this final amount using an EMI calculator. The number of equated monthly installments is equal to the number of months in the loan repayment tenure. EMIs are beneficial as you can pay the borrowed amount back in parts and reduces the financial pressure on the borrower. The EMI style is preferable as it is not easy for everyone to pay back a lump sum amount of money all at once especially in case of large amount such as home loans. Therefore, EMIs are an added advantage as you can pay little by little over the loan tenure to repay the amount borrowed in full. EMIs give a broader section of society the option to realize their dreams of affording expensive things, such as a house, car, etc., that they won’t be able to buy if they needed to make payments all at once. Using an EMI calculator, you can easily figure out your loan repayment requirement and plan your monthly budget accordingly. You have the flexibility to decide the amount that you are comfortable to pay off monthly and the duration for which you wish to make the payments depending upon your income and financial stability.
EMI payments contribute towards the loan amount and accrued interest on the loan amount. The initial EMI payments contribute more towards the interest component of the loan and this procedure is termed as front loading. In the later stages of the loan tenure, the major contribution of the EMI goes towards repayment of the loan principal.
Commonly, EMIs are fixed and the borrower has to pay fixed monthly installments to satisfy the loan amount. But, the loan EMIs can vary in the case of floating interest rate loans and prepayments. The amount of your monthly EMI depends on certain factors pertaining to your loan. You can calculate the EMI applicable to your loan using the formula for calculating EMI. Calculating EMIs using the formula is not an easy task and involves complicated calculations. Rather, opting for an EMI calculator is a better choice as it determines EMIs within seconds of your input.