EMI Calculator for Home/Car/Personal Loan. Use to estimate EMI and also analyse.

What is an EMI?
EMI stands for Equated Monthly Instalment which is a fixed amount of payment a borrower has to make to the lender at a specified date on monthly basis. EMIs consists of your principal loan amount and interest amount, payable every month.

Although the EMI remains fixed for every month, the amount paid towards principal and interest changes. The interest component constitutes a major portion of the EMI payment in the initial stages. However, as the loan period progresses and the principal outstanding reduces, the portion of interest repayment decreases. This happens until the end of the loan period when the entire loan amount has been paid off.

How EMI Calculators Work?
To put it quite simply, an EMI calculator is a tool that will require you to enter the amount you want to borrow, the duration of the loan, the interest rates and the processing fee and it will do the rest. The basic formula that works behind an EMI calculator is:

E = P x r x (1+r)^n/((1+r)^n – 1)

Here:

E is the amount that you will have to pay every month; basically the EMI.
P is the amount that you want to borrow.
r is the rate of interest that is applicable but calculated on a monthly basis instead of the annual rate of interest. It is obtained by using the formula r = (annual interest/12) x 100.
n is the duration of the loan in terms of months. So if you select a term of 5 years, n will be 60.
This is the most basic formula that will be used by the calculator but there are some that may even include things like the processing fee for the loan, into the calculation of the monthly instalment. The processing fee will generally be a certain percentage of the amount being borrowed and can range from 1% to 3% but since it is decided by the bank it can be different for each bank.