# EMI Calculator

₹1,000
₹1,00,00,000

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1 yrs
30 yrs

## EMI Calculator

Our EMI calculator or loan EMI calculator is a state-of-the-art tool that can be used to calculate values like EMI payables and interest liabilities against the EMIs. If you want secured or unsecured loans, the first thing you must do is check out the monthly installments and their interest rates. You can get all the details on this page with a few simple clicks.

### How Does an EMI Work?

EMI or Equated Monthly Installments is a very popular term in the financing or loan sector. It refers to a fixed amount of money that borrowers pay to lenders every month. The fixed sum contains both the principal amount and its accrued interest. Through EMIs borrowers can afford a large loan amount because they can break down the loan amount into manageable monthly payments. The repayment period can range between a few months to several years.

Let us understand the concept of Equated Monthly Installments (EMIs) with the help of an example. But before diving into that, let us understand the formulae to calculate EMIs.

EMI Calculator Formula

EMI = [P x R x (1+R) ^N]/ [(1+R) ^ (N-1)],

where –

P is the principal amount

R is the rate of interest

N is the loan tenure

Suppose you take out a loan of INR100,000 (P) at an annual interest rate of 5% (R) for a tenure of 5 years (N).

First, convert the annual interest rate into a monthly interest rate, as the formula requires the rate to be in the same period as the loan tenure. So, divide the annual interest rate by 12 (months):

Monthly Interest Rate (R) = 5% / 12 = 0.05 / 12 = 0.004167 (approx.)

Now, let's plug these values into the formula to calculate the EMI:

EMI = [P x R x (1+R)^N] / [(1+R)^(N-1)]

EMI = [100,000 x 0.004167 x (1+0.004167)^60] / [(1+0.004167)^(60-1)]

Here, N = 5 years = 5 x 12 = 60 months.

Now, calculate (1+R)^N:

(1+0.004167)^60 = (1.004167)^60 ≈ 1.2837

Similarly, calculate (1+R)^(N-1):

(1+0.004167)^(60-1) = (1.004167)^59 ≈ 1.2782

Now, plug these values back into the formula:

EMI = [100,000 x 0.004167 x 1.2837] / 1.2782

EMI ≈ [520.83 x 1.2837] / 1.2782

EMI ≈ 668.52

So, the Equated Monthly Installment (EMI) for this loan would be approximately INR 668.52.

This is the fixed amount that you would pay each month for the entire loan tenure of 5 years to repay the loan amount along with the interest. Each month, a portion of this installment goes towards paying off the principal amount, and the rest goes towards paying off the interest. Over time, the ratio between the principal and interest portions changes, with more of the EMI going towards principal repayment as the loan matures.

### How to Use the EMI Calculator?

Investkraft’s EMI calculator is a very easy-to-use tool that you can use to calculate the monthly payment amount for your borrowed amount at your chosen interest rate. Here are the steps you should follow to use the EMI calculator:

1. Enter the loan amount
2. Select your desired rate of interest
3. Choose the period for which you want to pay EMIs
4. Click on the “Invest Now” button

### What are the Benefits of an EMI?

Listed below are some main benefits of Equated Monthly Installments (EMIs) -

• Afford to Buy Expensive Items: EMIs empower customers to buy expensive items which otherwise they could not have purchased
• Easy on the Pockets: Borrowers have the power to choose tenure and interest rate for the borrowed amount as per their repayment ability. This gives them the freedom to buy expensive items without altering their monthly expenses too much
• Creates Financial Reputation: Borrowers who repay their loans on time get positive credit scores which demonstrates fiscal discipline and reliability. Timely repayment of loans comes in handy during future loan approvals.
• No Third-Party Involvement: The borrower repays the loan amount directly to the lender without the involvement of third-party lenders.

## FAQs on EMIs

A: Yes, you can buy gold in EMI. Not only can you purchase gold ornaments, but you can also buy gold bars in EMI.

A: Pre-EMI refers to the interest payable on a loan amount disbursed in part or stages before the full loan amount is utilized. This term is only applicable in the real estate arena.

A: Most banks and loan issuing agencies have mobile applications through which you can instantly check your EMI status.

A: EMIs not paid on time attract late fees and negative credit scores. Asset repossession or legal actions are other negative effects of continuous EMI defaults.

A: Yes, you can convert credit card bills into EMIs but it might come with a higher interest rate.

A: 18% GST is charged on credit card EMIs. Earlier it used to be 15%.

A: The best and most effective way to reduce your home loan EMIs is by pre-payment which means paying back a large portion of the loan amount during an extra inflow of cash.

A: Yes, you can take multiple EMIs on a single credit card within the available credit limit of the card.

A: If you fail to pay one EMI, your lender will charge you a late payment fee. Also, a single EMI payment failure might result in your credit score decreasing by approximately 50 to 100 points.