The equated monthly instalment or EMI as it is commonly called is the amount that an individual has to pay to the banks and financial institutions on a monthly basis in return for a loan. This amount can be calculated easily with the help of EMI calculators online.
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What is an EMI Calculator
EMI calculator is an online tool designed to calculate the monthly EMI to be paid in return for a loan. The loan borrower needs to enter the preliminary details about the loan such as the loan amount, time for which the loan is taken, and the interest levied on the loan. Once this information is provided, the tool fetches the result and displays it in a simple and easy to understand format. This is an inclusive tool to get quick and accurate details about the EMIs to be paid. There are different types of EMI calculators depending on the types of loans such as car loans, home loans, business loans, personal loans, etc. These calculators can be used by individuals to get clarity on their monthly financial obligations and maintain their funds judiciously.
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Benefits of Using an EMI Calculator
Following are some of the major benefits of an EMI calculator:
- Convenience: One of the benefits of using an EMI calculator online is that it is easier to use as compared to the manual method. The user of the calculator just needs to input some basic information such as the amount borrowed, tenure of the loan, and the interest rate to get instant and reliable results.
- Accuracy: One of the commonest disadvantages of the pen and paper method of calculations is that they may yield inaccurate results due to negligence or calculation errors. An online EMI calculator safeguards against such inaccuracies by providing a hundred per cent accurate results within seconds.
- Fast Calculations: Another major benefit of using an EMI calculator online is that it renders results within a few seconds. While manual computations might take a lot of time and still have a probability of inaccurate results, the online calculator provides the output instantly. The user just needs to enter the required information and click on ‘Calculate’ to get the needed information in a blink of an eye.
- Specificity: Using an EMI calculator online also provides the benefit of specificity. This means that there are different calculators designed to provide information on diverse types of loans. Therefore, an individual applying for a home loan can use a home loan EMI calculator, one applying for a car loan can use a car loan EMI calculator, and so on.
- Graphic Representation: Most of the EMI calculators available online provide their output in a readable format. They not only provide the basic data about the loan and its EMIs but also give a pictorial depiction of important factors. These calculators also give a graphical representation of parameters such as outstanding principal, remaining time, interest rate, etc.
- Amortization Table: EMI calculators also provide an amortization table for each kind of loan. This table helps in examining the EMIs payable based on several factors and in analyzing the performance of the loan over time.
How does the EMI calculator work?
The EMI calculators require the borrower to input certain variables that are used to compute the EMIs and other details. These variables include:
Loan amount: This is the actual amount borrowed by the individual. It must be noted that the EMI is directly proportional to the loan principal amount
Tenure of the loan: This is the time period by when the loan has to be repaid completely. Note that the tenure of the loan, interest levied, and the EMIs are all directly proportional to each other
Rate of interest: This is the interest rate that is to be paid by the borrower. This varies from one loan to another. The EMI varies with the type of interest rate levied such as fixed, floating, or hybrid.