Understanding Your Personal Loan EMI
An Equated Monthly Installment (EMI) is a fixed amount that you pay to your lender every month on a specific date for the entire loan tenure. EMIs are a popular way to repay loans, including personal loans, because they offer predictability and make budgeting easier. Each EMI payment consists of two parts: the principal repayment and the interest payment.
How is your EMI calculated?
The formula used to calculate your EMI is as follows:
EMI = P × r × (1 + r)^n / [(1 + r)^n – 1]
- P = Principal Loan Amount
- r = Monthly Interest Rate (Annual Interest Rate / 12 / 100)
- n = Loan Tenure in Months
Key Factors Affecting Your EMI:
- Loan Amount (Principal): A larger loan amount will naturally result in a higher EMI, assuming other factors remain constant.
- Interest Rate: This is one of the most significant factors. A higher annual interest rate will lead to a higher EMI. Even a small difference in interest rates can impact your monthly payments considerably over time.
- Loan Tenure: A longer loan tenure will generally result in a lower EMI because you are spreading the repayment over a longer period. However, this also means you will pay more total interest over the life of the loan. Conversely, a shorter tenure means a higher EMI but less total interest paid.
Example Calculation:
Let's say you take a personal loan of $50,000 with an annual interest rate of 12% for a tenure of 60 months.
- Principal (P) = $50,000
- Annual Interest Rate = 12%
- Monthly Interest Rate (r) = 12% / 12 / 100 = 0.01
- Loan Tenure (n) = 60 months
Using the EMI formula:
EMI = 50000 × 0.01 × (1 + 0.01)^60 / [(1 + 0.01)^60 – 1]
EMI = 50000 × 0.01 × (1.01)^60 / [(1.01)^60 – 1]
EMI = 500 × 1.8166967 / [1.8166967 – 1]
EMI = 908.34835 / 0.8166967
EMI ≈ $1,112.21
This means you would pay approximately $1,112.21 every month for 60 months to repay your personal loan.
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function calculateEMI() {
var principal = parseFloat(document.getElementById("principal").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTenure = parseFloat(document.getElementById("loanTenure").value);
var resultDiv = document.getElementById("result");
if (isNaN(principal) || principal <= 0) {
resultDiv.innerHTML = "Please enter a valid Loan Amount.";
return;
}
if (isNaN(annualInterestRate) || annualInterestRate <= 0) {
resultDiv.innerHTML = "Please enter a valid Annual Interest Rate.";
return;
}
if (isNaN(loanTenure) || loanTenure <= 0) {
resultDiv.innerHTML = "Please enter a valid Loan Tenure.";
return;
}
var monthlyInterestRate = annualInterestRate / 12 / 100;
var numberOfMonths = loanTenure;
// Calculate EMI
var emi = principal * monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfMonths) / (Math.pow(1 + monthlyInterestRate, numberOfMonths) – 1);
// Handle cases where interest rate is 0
if (monthlyInterestRate === 0) {
emi = principal / numberOfMonths;
}
// Display the result
resultDiv.innerHTML = "Your estimated EMI is:
$" + emi.toFixed(2) + "" +
"Total Principal:
$" + principal.toFixed(2) + "" +
"Total Interest Payable:
$" + (emi * numberOfMonths – principal).toFixed(2) + "" +
"Total Payment:
$" + (emi * numberOfMonths).toFixed(2) + "";
}