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Know about EMI calculator

An EMI calculator is a simple online tool that helps you assess your monthly pay-outs of EMIs.

Updated:March 6, 2019, 3:50 PM IST
Know about EMI calculator
An EMI calculator is a simple online tool that helps you assess your monthly pay-outs of EMIs.

When you take a loan from a bank, you agree to repay the principal along with the applicable interest, in the form of monthly installments over a predetermined period of time. This sum that you pay is referred to as EMIs (Equated Monthly Installments), calculated on the basis of 3 basic parameters, i.e. loan amount or principal, tenure of the loan, and the interest rate charged on the loan amount.

An EMI calculator helps you to easily calculate the monthly installments payable towards a loan. Read on to know more about what exactly an EMI calculator is and how you can use it:

What is an EMI calculator?

An EMI calculator is a simple online tool that helps you assess your monthly pay-outs of EMIs. This in turn, allows you to chalk out a budget in accordance with your finances, and opt for an appropriate loan amount, spread over convenient tenures so that you don’t end up defaulting at the time of repaying the debt. A number of online portals have EMI calculators that you can use anytime, anywhere.

How to use an EMI calculator?

EMI calculators, no matter what the website is, spell convenience and ease. All you need to do is enter the variables of the loan amount (read the principal, rate of interest and repayment tenure). You can either use the slider to adjust the values in the EMI calculator page, or simply type them directly in the relevant boxes.

Once you enter these variables and click on ‘Calculate’, the payable EMI amount will be calculated and displayed on the screen instantly. A pie-chart depicting the break-up of the total payment (along with the principal amount and interest payable) is also displayed. If you shift the slider to change the values of the variables, the EMI amount will be recalculated and displayed again.

How does an EMI calculator work?

As discussed above, loan amount, tenure and the interest rate are the three key parameters affecting the EMIs towards a loan. An EMI calculator uses these three variables and puts them into a simple mathematical formula that reads like:

EMI = [P x R x (1+R) ^ N] / [(1+R) ^ N -1]

In this formula, variables P, R, and N denote principal amount, rate of interest, and the loan tenure (in months) respectively.

EMI calculators use a universally accepted formula, irrespective of the type of loan you want to avail. You can click here to use the SBI EMI calculator, in order to calculate EMIs towards your loan, within a matter of seconds.

To know more, click here.

This content has been created in association with YONO SBI.

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