# EMI Calculator

Principal

Expected Rate of Interest

%
6% 30%

Tenure

0.25 Year 30 Years

#### EMI Breakdown

Principal

###### ₹ 1,00,00,000

Total Interest payable

###### ₹ 37,48,187

Total Payable amount

###### ₹ 1,37,48,187

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Monthly EMI

#### ₹ 1,14,568

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#### Monthly Amortization

EMI Paid

###### ₹ 1,14,568 /month

Total payable amount

###### ₹ 1,37,48,187

Months

Amount

Equated Monthly Installment - EMI for short - is the amount payable every month to the bank or any other financial institution until the loan amount is fully paid off. It consists of the interest on loan as well as part of the principal amount to be repaid.

## What is a EMI?

The sum of principal amount and interest is divided by the tenure, i.e., number of months, in which the loan has to be repaid. This amount has to be paid monthly. The interest component of the EMI would be larger during the initial months and gradually reduce with each payment. The exact percentage allocated towards payment of the principal depends on the interest rate. Even though your monthly EMI payment won't change, the proportion of principal and interest components will change with time. With each successive payment, you'll pay more towards the principal and less in interest.

## Formula to calculate EMI • E is EMI
• P is Principal Loan Amount
• r is rate of interest calculated on monthly basis. (i.e., r = Rate of Annual interest/12/100. If rate of interest is 10.5% per annum, then r = 10.5/12/100=0.00875)
• n is loan term / tenure / duration in number of months

## Floating rate EMI calculation

We suggest that you calculate floating / variable rate EMI by taking into consideration two opposite scenarios, i.e., optimistic (deflationary) and pessimistic (inflationary) scenario. Loan amount and loan tenure, two components required to calculate the EMI are under your control; i.e., you are going to decide how much loan you have to borrow and how long your loan tenure should be. But interest rate is decided by the banks & HFCs based on rates and policies set by RBI. As a borrower, you should consider the two extreme possibilities of increase and decrease in the rate of interest and calculate your EMI under these two conditions. Such calculation will help you decide how much EMI is affordable, how long your loan tenure should be and how much you should borrow.

## Optimistic (deflationary) scenario:

Assume that the rate of interest comes down by 1% - 3% from the present rate. Consider this situation and calculate your EMI. In this situation, your EMI will come down or you may opt to shorten the loan tenure. Ex: If you avail home loan to purchase a house as an investment, then optimistic scenario enables you to compare this with other investment opportunities.

## Pessimistic (inflationary) scenario:

In the same way, assume that the rate of interest is hiked by 1% - 3%. Is it possible for you to continue to pay the EMI without much struggle? Even a 2% increase in rate of interest can result in significant rise in your monthly payment for the entire loan tenure.

Such calculation helps you to plan for such future possibilities. When you take a loan, you are making a financial commitment for next few months, years or decades. So consider the best as well as worst cases...and be ready for both. In short, hope for the best but be prepared for the worst!