Taking a loan helps you achieve big dreams like buying a house or a car. However, paying it back can be stressful if not planned correctly. The key to stress-free repayment is understanding your Equated Monthly Installment (EMI) before you even apply for the loan.
Table of Contents
1. What is an EMI?
EMI (Equated Monthly Installment) is the fixed amount of money you pay to your bank or lender every month to repay your loan. It consists of two parts:
- Principal Component: The actual money you borrowed.
- Interest Component: The cost of borrowing that money.
In the initial years of your loan, a large portion of your EMI goes towards interest. As the loan matures, the interest portion decreases, and the principal repayment increases.
2. Factors That Affect Your EMI
Your EMI amount depends on three major factors:
Loan Amount
Higher the loan amount, higher the EMI.
Interest Rate
Even a 0.5% difference can save you lakhs.
Tenure (Time)
Longer tenure = Lower EMI but Higher Total Interest.
3. How to Use Our EMI Calculator?
Calculating EMI manually using the mathematical formula [P x R x (1+R)^N] / [(1+R)^N-1] is difficult and prone to errors. Our online tool does it in seconds.
- Enter Principal Amount: Total loan amount you wish to take (e.g., ₹50,00,000).
- Enter Interest Rate: The annual rate offered by your bank (e.g., 8.5%).
- Select Tenure: Choose how many years you want to pay (e.g., 20 Years).
The tool will instantly show you:
- Your Monthly EMI Amount.
- Total Interest you will pay over the loan period.
- Total Payment (Principal + Interest).
4. Understanding the Amortization Schedule
One unique feature of our calculator is the Amortization Schedule (also called the Loan Breakup Table). It shows you exactly where your money is going month by month.
When you look at this table/chart in our tool, you will notice that in the first few years, almost 70-80% of your EMI goes just into paying interest! The principal reduces very slowly. This knowledge helps you plan prepayments.
5. Tips to Reduce Your Loan Burden
Nobody likes to be in debt. Here are smart ways to close your loan faster:
- Make Prepayments: Whenever you get a bonus or increment, pay it towards your loan principal. Even one extra EMI per year can reduce your tenure by years.
- Switch Loans (Refinancing): If another bank offers a lower interest rate (e.g., 0.5% lower), consider transferring your loan.
- Increase EMI Annually: If your salary increases by 10%, try to increase your EMI by 5%. This drastically cuts down the interest.