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How can EMI Calculator help you?

Three major factors influence the final EMI amount that a borrower pays to the lender. The interest rate, the loan tenure, and the principal amount, in combination, give a simple EMI formula for EMI calculation. The formula is as follows:

E=[P×R×(1+R) n] ÷ [(1+R) n-1]

In the above formula, E represents EMI, P is the principal loan amount, R is the monthly interest rate (calculated as R%/12), and n represents the loan tenure. To better understand the use of EMI calculation, assume a borrower receives a property loan of Rs.1 crore that must be repaid over the next 20 years at an interest rate of 8%.

So here, R= 8%/12 = 0.00666667

EMI= [10000000*0.00666667*(1+0.00666667)240 / [(1+0.00666667)240 -1] = 83644

In this case, the monthly EMI payment for the borrower would be Rs.83,644. Therefore, the total amount payable in interest would be Rs.1,00,74,544, and the total amount due would be Rs.2,00,74,560.

The EMI calculation is more complicated if you wish to do it manually when you want to know the bifurcations of the EMI to the components of interest and principal. Besides the benefit of ease, the other points that make equated monthly instalment calculators useful are-

  • It assists you in obtaining an accurate estimate of your EMI amount so that you can budget your monthly finances accordingly.
  • You can save time by using a loan EMI calculator. You don't have to do the complicated calculations manually, which can take a long time.
  • It eliminates the possibility of a calculation error, giving you precise results every time.

How to use an EMI calculator?

The easy EMI calculator has been created in such a way that anyone can use it. To calculate your monthly EMI payments, you don't need to learn any complicated formulae. It is simple to use, intuitive to understand, and quick to perform, with colourful charts and instant results. In the EMI Calculator, you will have to enter the following information:

  • The principal amount of the loan
  • Term of the loan (months or years)
  • Applicable interest rates (percentage)

You can either adjust the values with sliders in the EMI calculator form or type the values directly in the relevant boxes provided to enter more precise values. The EMI calculator will recalculate your monthly payment (EMI) amount when the values are changed.

There's also a pie chart showing the breakdown of total payment (total principal vs genuine interest payable). In all charges made against the loan, the EMI interest calculator shows the genuine interest versus principal percentage.

BENEFITS OF EMI CALCULATOR ONLINE

1. Accessibility:You can use the loan EMI calculator at any time and from any location. You are also free to use the finance EMI calculator as many times as you want.

2. Simple and time-efficient: When comparing the loans offered by different banks, using the same formula over and over can become tedious and time-consuming. However, by calculating EMI online, you can save time and complete all of the lengthy and tedious calculations in a matter of seconds. As a result, you can experiment with as many different amounts, tenures, and interest rates as you want.

3. Accuracy: When performing calculations manually, you run the risk of making a mistake. When you calculate EMIs for loans offered by different banks separately, the chances of making an error increase even more. With a single click, the online EMI calculator assists you in making error-free calculations.

4. Helpful in the process of financial planning: When you calculate an EMI for a loan, you can see how much money you'll have to pay back if you take out a loan for a certain amount, term, and interest rate. That enables you to plan your finances before taking out the loan, ensuring that the loan you take is well within your monthly budget. You can also experiment with the loan parameters to find the best term in which the EMI is affordable.

5. An online EMI calculator for every type of loan: You can use EMI calculators for each type of loan, such as a car loan, home loan, or student loan. Even though the parameters for each loan are essentially the same, there may be times when you need to use loan-specific EMI calculators. That means that each loan must be repaid. The EMI calculator is designed for a specific loan and should only be used for that loan.

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FAQs

The 'Equated Monthly Installment,' or EMI, is the amount you need to pay to the bank or financial institution on a pre-set date each month until the loan amount, including interest, is fully repaid. The principal and interest components of the EMI are designed so that the interest component is considerably more significant than the principal component in the early part of your loan. In comparison, the main element is more critical in the latter part of the loan tenure.

There are two methods for calculating an EMI, namely-

  • Flat-rate method:

In this case, even though the loan balance is gradually being paid down, each interest charge is calculated using the original loan amount in the flat-rate method. The EMI is calculated by adding the total loan principal and total interest on the principal, dividing the sum by the number of EMI payments, the number of months in the loan term.

  • Reducing-balance method:

The interest payment is calculated using the reducing balance method, which is based on the outstanding principal. It means that each EMI's interest and principal repayment portions change over time. Interest payments make up a larger portion of the EMI at the beginning of the loan term, as a percentage of the loan outstanding. The interest amount decreases as the loan is gradually repaid over time.

The online EMI calculator can be used to calculate EMIs for various loans, including personal loans, business loans, and car loans. All you need to know is the applicable interest rate on loan and the tenure of the loan.

An Equated Monthly Instalment contains a portion of the principal and interest due on your loan. It must be paid until the end of the term.

If you skip your EMI, your credit score will be negatively impacted, and The lender bank or financial institution may levy late fees and penalties.

The EMI can change during repayment tenure if you make a lump sum part payment towards the loan. This payment may either reduce the repayment tenure or the EMI amount.

No cost EMI means you don't have to pay any additional interest on the loan taken. As a result, you only have to pay the product's actual price through EMIs

Missed EMIs are divided into two groups-

a)       Major default:

These, as the name implies, are subject to the harshest penalties. If you have not made any payments in the last 90 days or more, it is considered a major default. It will appear on your credit report and may have an impact on future loans.

b)      Minor default:

If the last payment was made within 90 days or less, the missed EMI is considered a minor default. Borrowers who have minor defaults on their loan accounts can avoid the negative consequences if they act quickly enough.

Disclaimer : ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code:-07730) and BSE Ltd (Member Code :103) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The non-broking products / services like Mutual Funds, Insurance, FD/ Bonds, loans, PMS, Tax, Elocker, NPS, IPO, Research, Financial Learning etc. are not exchange traded products / services and ICICI Securities Ltd. is just acting as a distributor/ referral Agent of such products / services and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism.