EMI Calculator – EMI means “Equated Monthly Installment”, for short it is called EMI. It is the amount payable consistently to the financial firm or bank until the loan amount is completely paid off. It comprises of interest calculated on loan as well as a part of the principal sum to be repaid. The aggregate of principal amount and interest is divided by the tenure that is many months, in which the loan has to be repaid. This amount has to be paid monthly. The interesting part of the EMI would be larger during the initial month and gradually decrease with every installment.
How do EMI calculators work?
It is quite simple, an EMI calculator is a tool that requires entering the amount you want to borrow, the loan duration, the interest rate, and the processing fee and it will do the rest. There is a basic formula that works for calculating EMI is;
E= P*r*(1+r) ^n/ ((1+r) ^n-1)
- E is EMI, which you have to pay every month
- P is the principal loan amount that you want to borrow
- R is the rate of interest that is calculated every month.
- N is a loan term of the month.
It is a basic formula used by the calculator yet some may even include things like processing fees for the loan, into the calculation of the monthly installment. The processing fee will generally be a certain percentage being acquired and can be extended from 1% to 3% but since it is decided by the bank it can be different for each bank.
Importance of EMI calculator
There are lots of benefits and uses for calculators used for EMIs. Here is some importance of EMI calculator:
Loan Amount– It is a great idea to acquire just as much as you can repay. Depend upon the loan EMI calculation, you can choose a proper loan amount to meet your financial needs. Keep up a low debt-to-salary proportion to avoid defaulting on your loan.
Loan tenure– Short loan tenure implies higher EMI installments and lower interest payment though long loan tenure implies lower EMI installments yet higher interest payment. Calculate EMIs various loan tenure using the online EMI calculator. Choose appropriate loan tenure to avoid a higher interest payment.
Loan EMI– A borrower with a high debt-to-income ratio has higher chances of defaulting on the loan. If you default on a secured loan like a vehicle loan, the bank will repossess your vehicle and put it up for auction to repay for bet dues. Which is the reason; your loan EMI installments must not exceed over 50% of your salary.
Types of EMI calculator
There are various types of EMI calculator, as it depends on what loan you choose as per your requirements. So, various types of EMI calculators are as follow:
Home loan EMI calculator
The home loan EMI calculator comes packed with features that can range from the obvious to not so obvious. It clearly shows the specific EMI that will be payable consistently for a particular amount obtain and a particular tenure. The component that is not at all that undeniable is the way that the calculator can also give the facility to include pre-installment towards the home loan. This implies that when the calculator shows you the installment payable, it has just accounted for prepayment and has additionally when showing the separation of costs.
Car loan EMI calculator
The car loan EMI calculator is a tool that can be utilized to calculate the specific amount that you should pay on a month to month premise when you choose to take a car loan. This EMI calculator also will gather data identified with the amount you wish to acquire the financing costs, the processing fee and the tenure of the loan and gives the amount that you will pay each month. Down installments for the vehicle don’t need to be viewed as when utilizing this calculator and it also accompanies the separation of the costs and the amortization table.
Personal loan EMI calculator
The personal loan EMI calculator is the perfect tool for deciding the amount you can stand to take care of since it is specific to a personal loan. It also collects details of the amount you wish to obtain, the term, financing costs and the processing fee for the loan. It can likewise be modified to consider any prepayments that you expect to make before revealing to you the EMI that you should pay.