What is EMI and How it is calculated?

How Is an EMI Computed?

What is EMI and How it is calculated?

In today’s world, where everything is automated and technology taken a new hike in our daily lives. We can’t imagine our life’s without the technology products. But, how can we buy those products or services with our salary?. Many banks and financial institutions have introduced new schemes for easy processing and getting the loan for purchasing the product or services. EMI is one of the concepts that ease the borrower to take the products easily. In today’s world, where everything is automated and technology taken a new hike in our daily lives. We can’t imagine our life’s without the technology products. But, how can we buy those products or services with our salary?. Many banks and financial institutions have introduced new schemes for easy processing and getting the loan for purchasing the product or services. EMI is one of the concepts that ease the borrower to take the products easily.
Small assets or products you can buy easily without any interest. But what the case if you want to buy a home, you can’t buy a new home with your salary savings, it’s a big amount and you definitely need a loan for it and with the help of EMI, you can easily pay your loan amount. But, before going to take a loan you must have a basic knowledge of the loan and how EMI is calculated for repayment of the loan.
What’s EMI?
An Equated Monthly Installment is the important component of taking a loan. It’s a fixed amount that you need to pay your lender on a monthly basis towards repayment of your loan until the loan is completely paid.
It’s the only component that helps you to take a loan for your immediate financial needs, which allows you to repay in installments over a period of time. Its value depends on the amount of loan you were taken, interest rates and tenure.
EMI can be paid to the bank on the fixed date every month via cheque, paying manually or by setting auto debit instructions with your bank.
What are the different elements of EMIs?
It mainly consists of two segments- Principal and Interest. Interest is the amount charged on the principal amount, which is segmented in every monthly payment amount during the long tenure you fixed.
In the early days, the percentage of interest is more and the principal amount is less and in progressive stages of EMI the amount of interest will be less and the principal amount will be high until the loan amount gets completely paid.
Important note: When you have a part of the amount to repay, then you pay it so that you will be charged only on the remaining principal amount which saves your interest on that principal amount.
Is EMI fixed throughout the tenure or it may change based on any factors?
1. In case, if you selected the floating interest rate the interest rate on your loan will change based on the interest rates change by the lender, that change how in your EMI. In this case, You can request your lender to not to change the EMI amount instead change the tenure of the loan.
 When you prepay the loan amount- The principal amount will get decreased and here you need to pay less interest and that can reduce your EMI amount. In this case, also you can ask your lender to change the tenure, not the EMI. So that you can reduce the tenure and complete the loan quickly.
When you opt for progressive EMI- This is generally adopted by the young people who are at the initial stage of their career and can progress in their career with good package. They can initial pay, the less amount and when the month progress they can pay a high amount.
What are the components that affect the EMI?Interest rates, Tenure, and Loan Amount.
How is EMI calculated?EMI is calculated by software system or by using formula –
EMI= P x r x (1+r) ^n/ ((1+r) ^n – 1)
Where P is the principal amountR is the rate of interestN is the duration of your loan or tenure
It’s a very daunting task to do it manually to calculate it. You can do it with our EMI calculator.
If you get any doubts regarding calculating EMI, you can contact our financial adviser at info365eloans.com, We are always ready to help you at no cost.