How to use this How does this EMI calculator
An Equated Monthly Installment (EMI) is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. Equated monthly installments are applied to both interest and principal each month so that over a specified number of years, the loan is fully paid off.
Mathematical Formula & Logic
E = P × r × (1 + r)^n / ((1 + r)^n - 1). Where E is EMI, P is Principal Loan Amount, r is monthly rate, and n is tenure in months.
Key Calculation Assumptions
- Calculations assume fixed compounding frequencies unless custom compounding is selected.
- Results do not factor in unannounced statutory tax rate adjustments or customized bank penalty fees.
- Calculations serve educational decision-making and planning purposes.
Frequently Asked Questions (FAQs)
What is FOIR?
Fixed Obligation to Income Ratio (FOIR) measures how much of your monthly income goes toward paying existing debts. Banks generally limit your maximum EMI to 40-50% of your net monthly income.
How does prepaying a loan reduce total interest?
Prepayments reduce your outstanding principal balance directly. Since interest is calculated monthly on the remaining principal, reducing principal slashes total interest owed and shortens your tenure.