Why use the EMI calculator?
The EMI calculator calculates the monthly installment (EMI) to be paid towards a loan based on the loan amount, interest rate, and loan tenure. It helps determine a loan's affordability and helps in budgeting for the loan repayment. It also helps compare different loan offers and find the best deal for the borrower. It can also be used to calculate the total interest and amount paid over the loan tenure. Overall, the EMI calculator is a useful tool for individuals planning to take a loan, as it helps them make informed decisions about their finances.
How does EMI work?
An EMI calculator is a tool that helps individuals calculate the monthly instalment they will have to pay towards a loan. EMI stands for Equated Monthly Installment, and it is the fixed amount that an individual has to pay every month to repay the loan. EMI calculators are widely used to plan and budget for a loan, as they provide a clear understanding of the total cost of the loan and the monthly instalment that will be required.
The formula for calculating EMI is as follows:
EMI = P x r x (1+r)^n / ((1+r)^n-1)
P is the principal loan amount.
r is the interest rate per month.
The loan is for a set number of months.
The formula calculates the EMI by multiplying the principal amount with the interest rate and dividing the result by the number of months for which the loan is taken. The interest rate is calculated on a monthly basis, as it is easier to understand and compare different loans.
Let's take an example to understand how the EMI calculator works:
Assume that an individual takes a loan of Rs. 5,00,000 at an interest rate of 10% per annum for a period of 5 years. The interest rate per month is calculated as follows:
Interest rate per month = (10/12)% = 0.83%
The number of months for which the loan is taken out is calculated as follows:
5 years divided by 12 months equals 60 months.
Using the above formula, we can calculate the EMI as follows:
EMI = 5,00,000 x 0.83/100 x (1 + 0.83/100)60/(1 + 0.83/100)60-1) = Rs. 10,431
This means that the individual will have to pay Rs. 10,431 as the monthly instalment for a period of 5 years to repay the loan of Rs. 5,00,000.
An EMI calculator is a useful tool for individuals who are planning to take a loan. It helps them understand the total cost of the loan and the monthly instalment that will be required. It also helps them compare different loans and choose the one that best suits their needs. By using an EMI calculator, individuals can plan and budget for their loan and make sure that they can afford the monthly instalments.
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