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 pay-outs. The borrower just needs to enter the variables of the loan such as the principal amount, tenure and interest rate and it instantly fetches a result which is the EMI. Calculating EMI using the online EMI calculator is easy and you get to know your loan EMI in seconds. Swift Loans 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 Instalment. An equated monthly instalment (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 instalments 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 over the loan tenure and repay the amount borrowed in full. EMIs gives 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 instalments 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.
How are Loan EMIs Calculated?
Loan amount, tenure and interest rate are the three key parameters of a loan and these vary in case of different loan providers. EMI applicable to a loan varies according to all these three parameters. Therefore, before choosing a particular loan, it is very important to have an understanding of these three parameters and how do they relate to the loan EMI. An EMI, or equated monthly instalment, is the amount that is payable by you every month to the lender in order to satisfy the principal and the accumulated interest. You can calculate EMI for loans in the following three ways:
Calculate Your EMI Using Mathematical Formula
EMI = [P x R x (1+R)^N]/[(1+R)^ (N-1)]
( In this formula the variables stand for:
EMI is the equated monthly instalment)
P is the principal or the amount that is borrowed as a loan
R is the rate of interest that is levied on the loan amount (the interest rate should be a monthly rate)
N is the tenure of repayment of the loan or the number of monthly instalments that you will pay (tenure should be in months)
This is the same formula an EMI calculator uses to provide you with the correct EMI payable within seconds.
Let us consider an example to understand EMI calculations in a better way,
For instance, you have taken a personal loan of Rs. 2 lakhs for 2 years at an interest of 20 % p.a.
Firstly, we need to convert the annual interest rate into a monthly rate and the tenure into months.
To calculate the monthly interest rate, we divide the annual interest rate by the number of months in a year, i.e. 12, so monthly 20/12 = 1.66% per month
The 2-year loan tenure must also be converted into months before integrating into the formula i.e. 24 months
Now we have the three variables with us which we can integrate into the formula as follows:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
EMI= [2,00,000 x 1.66/100 x (1+1.66/100) ^ 24 / [(1+1.66/100) ^ 24 - 1)
EMI= Rs. 10, 179
The EMI calculator formula is universal and can be applied to different loans. The variation in EMI value occurs according to the three key variables, i.e. the loan amount, the loan tenure and the interest rate. The EMI payment is directly proportional to the loan amount and interest rates, which implies that with increase in amount and interest rate, the EMI on the loan also increases. However, the EMI is inversely proportional to the tenure of loan, which means that though the amount of paid interest increases with longer tenures, but the EMI payments decrease if the loan is repaid over a longer time period.