EMI (Equated Monthly Instalments) is an essential part of a loan or credit. It is a fixed amount of payment a borrower must make to the lender at a specified date on a monthly basis.The EMI is dependent on multiple factors such as the borrowed money,rate of interest, tenure of the loan and monthly/annual resting period.
An EMI calculator is primarily a tool that helps you calculate the monthly instalment you need to pay for the desired loan amount to the bank or Non-Banking Financing Company(NBFC). It becomes easier to plan your repayment schedule and monthly budget,in advance.
The basic formula that works for 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 each month, the EMI.
P is the principal borrowed amount
is the rate of interest that is calculated monthly instead of the annual rate of interest. It is obtained by using the formula r = (yearly interest/12) x 100.
N is the duration of the loan with regard to the months.
Why should you use an EMI calculator?
It is a tedious process to make manual calculations regarding investments, especially if itsa loan repayment. Hence, the EMI calculators can perform complicated calculations within seconds and serve quick outcome.
Manual calculations can lead to errors and give out wrong results. The monthly investment calculators are easily available on various banking websites and deliver precise results.
The calculators work according to the type of loan you are looking for. It can be a home loan or a car loan;you need to fill the information per se and get the results.
Types of EMI calculators:
1) Car Loan EMI calculator:
A car loan calculator is a tool used to calculate the exact amount you need to pay monthly post you get a car loan.This calculator will collect necessary information related to the amount you wish to borrow, the interest rates, the processing fee and the tenure of the loan and provide you with the amount that you will pay every month.
2) Personal Loan calculator:
This tool can be customised as per your needs. For a personal loan, the tool requires information on the amount borrowed, duration, interest rates and the processing fee for the loan.
3)Mutual fund SIP calculator:
A mf SIP calculator is used to predict the returns on your mutual fund SIP investments. The calculator requires basic information on investments namely, SIP amount, Dates of SIP investments, Date of redemption, and Maturity (redemption) amount.
Major banking companies arrange for monthly investment calculators on their official banking website. However, one must know that these calculators aren’t alone reliable to represent the performance of any security or investments. It's not necessary that they show the accurate results.