EMI
1. WHAT IS EMI?
EMI (Equated Monthly Instalment) is the fixed amount you pay to the lender every month until the loan is fully repaid. Each EMI includes both principal (loan amount) and interest.
2. HOW IS EMI CALCULATED?
EMI is calculated using the reducing balance method, where interest is charged on the outstanding loan amount.
The Effective Interest Rate is the true annual cost of the loan.
It includes the impact of compounding and any additional charges (processing fee, insurance, taxes, etc.).
BB monthly payment that includes both principal and interest.
EMI CALCULATION & EFFECTIVE INTEREST RATE
Understand the real cost of a loan
Monthly interest rate (Annual interest rate +12+100)
n = Loan tenure in months
HOW YOUR EMI IS SPLIT EACH MONTH
Principal (Reduces Loan) Interest (Cost of Borrowing)
If your lender charges a fee (e.g., $500 processing fee).
Always compare loans using EIR, not just the interest rate advertised.
EMI depends on loan amount, interest rate and tenure.
Effective Interest o Rate shows the Always compare loans using EIR real cost of your and total cost, loan.
not just EMI
Borrow smart. Understand your EMI. Compare wisely. Save more.