Equated monthly installment or EMI is a short amount (taken against the loan amount) a borrower has to pay to the lender on the specific date of each month. The lender calculates the number of EMIs for the loan amount using different methods including the Loan EMI calculator. The EMI calculation can be done considering various factors such as:
- Loan Tenure
- ROI or Rate of interest
- Principal amount, and
- Monthly/annual resting period
Pay your loan easily in form of EMIs
A financial organization divides your entire loan amount (principal component + interest component) into equal EMI which you have to pay once a month. The date is specified by the organization as per their guidelines.
In short, an EMI is the best method to repay the loan including its interest without getting worried.
Important Facts related to EMI:
- For the entire loan tenure, the EMI of a fixed interest rate loan remains fixed.
- The EMI is made for both the principal and interest amount of the loan.
- The first EMI possesses the lowest principal component and a highest interest component, but in the last EMI, you have to pay the lowest interest component and the highest principal component. Generally, after the first EMI the principal component rises every month whereas the interest component goes down.
Factors Affecting your Loan EMI:
There are several factors that directly or indirectly affect the EMI amount such as:
- Tenure of your loan: Loan tenure is inversely proportional to EMI. This means for longer loan tenure, the EMI payment decreases and vice-versa.
- Rate of Interest: It is an important factor that should be considered before taking a loan. If you need it for a longer time, i.e. if the loan tenure is longer, the EMI will be low and ROI will be higher. Get a brief about the types of ROI.
- Floating rate of interest: It will depend on the modifications made by the Reserve Bank of India.
- Fixed rate of interest: In this type, the rate of interest remains the same throughout the loan tenure.
- Mixed interest rate: The fixed rate of interest is followed by the floating rate of interest.
- Credit Score: A lender should check your credit score before approving your loan application. Basically, a credit score gives a deep insight into your financial records. It should be mandatory to have a good credit score for availing a loan at low-interest rates. Bad CIBIL or credit score adversely affects your EMI.
- Loan to Value Ratio: This is an important factor that should be considered by the lender in the case of a home loan. Loan to Value ratio is the percentage of the property value. If you can do a payment of a large amount as a down payment, then the loan to value ratio and the ROI both automatically get reduced.
- MCLR: Marginal Cost of Funds Based Lending Rates or MCLR will impact the interest rate and the EMI as well.
EMI Calculation:
There are several methods to calculate the EMI for your loan amount. It can be done using a mathematical equation, an excel sheet, and an EMI calculator.
Mathematical Equation for EMI Calculation:
- An EMI of a particular loan amount is calculated using the mathematical formula:
EMI = Loan Amount (P)*Interest Rate(r)*(1+interest rate) tenure in month / ((1+interest rate) tenure in month -1)
- e. P × r × (1 + r) n/ ((1 + r) n – 1)
Calculation of the EMI Using Excel
- It can done using PMT function
PMT (RATE, NPER, PV, FV, TYPE)
Other Methods: (for a home loan, personal loan and auto loan)
- Flat Rate Method: This is the method widely used for the calculation of payable interest for a vehicle loan and a personal loan. In this method, the interest rate remains fixed throughout the repayment tenure. On the other hand, the principal amount decreases with the monthly EMI payment. It can be calculated using the below-mentioned formula:
Interest Payable/ Installment = (Exact Loan Amount * No. of Years * Annual Interest Rate / Number of Installments
- Reducing Balance Method: It is the method to calculate the EMI of the loan amount of varying interest. In this method, the EMI is made including the ROI of the outstanding loan along with the principal repayment amount. After every EMI, the principal amount and the amount of payable interest get reduced.
Interest Payable/ Installment = Interest Rate per Installment * Remaining Loan Amount
EMI Calculator
An EMI Calculator is an online tool or device used to calculate your loan repayment amount on a monthly basis.
- The tools can easily calculate varied kinds of loans including home loan, personal loan, and more. Moreover, it is a great option to get ideas of the repayment amount you have to repay against your loan.
- You can use this online tool for the comparison of loans provided by different banks on the basis of interest rates.
- It helps you in finding the bank for the loan considering the repayment tenure
- It can be used to find out the accurate amount in just a few seconds. In comparison to an excel calculator, it is better to use an EMI calculator as it works fast and does not need any kind of extra skill.
Benefits of EMI Calculator:
There are a number of advantages of using an EMI Calculator for the calculation of repayment amount. A few of them are described here:
-
Easy to use:
An EMI calculator is an easy-to-use online device. You do not need any kind of expertise for using it, just input loan amount, repayment tenure and interest rates and it will calculate the EMI.
-
Easy to access:
The device can be easily accessible online from anywhere. Enter the variable to get the appropriate EMIs, loan amount, and tenure according to your needs.
-
Time-Saving
An EMI calculator is fast and simple and hence it takes less time in calculating EMIs for a particular loan.
-
Helps in financial planning in advance
Now, you can do advance planning of your loan repayment options through an EMI calculator.
-
High accuracy
It provides precise results. You can get the exact EMI amount after inputting the correct required values.
Money View Loan EMI Calculator:
Money View is a leading loan-providing company acknowledged for quick loan approval and low ROI. They used a specialized method to calculate the Loan EMI. Money View loan EMI calculator consists of a few unique features:
- Effortless Usage: It is simple and requires no extra effort or knowledge.
- High Speed: It can easily and quickly find out the EMI amount details.
- Precise/ Accurate: It provides precise information about the EMI for a particular loan amount.
Wrap Up:
Getting a loan is an easier task but the EMI payment of the loan amount on a specified date of each month sometimes dis-balances your entire financial planning. So, it is better to calculate the EMI of your loan amount before taking money from any bank or NBFC. Money View is a reputed money lending firm from where you can avail the loan according to your need. So, if you are in need of a home loan, personal loan, or any other loan, you can contact the Money View team to get your desired loan at a low-interest rate.
Table of Contents