What is an EMI?
Equated Monthly Installment (EMI) is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. Equated monthly installments are applied to both interest and principal each month so that over a specified number of years, the loan is paid off in full. The Anivicus EMI Calculator helps you figure out exactly how much you need to pay each month.
How is EMI Calculated?
The mathematical formula used by banks to calculate your EMI is:
$E = P \times r \times \frac{(1 + r)^n}{(1 + r)^n - 1}$
- E: is the EMI (Equated Monthly Installment).
- P: is the Principal Loan Amount.
- r: is the monthly interest rate (Annual Rate / 12 / 100).
- n: is the loan tenure in months.
Doing this calculation manually can be complicated, which is why our interactive calculator provides instant, error-free results.
How to Reduce Your Loan EMI Burden?
If you feel your monthly EMI is taking up too much of your salary, consider these expert tips to reduce your financial burden:
- Make Prepayments: Whenever you receive a bonus or extra income, make a lump sum prepayment towards your principal. This drastically reduces the total interest payable over the loan tenure.
- Opt for a Longer Tenure: If you want a smaller monthly EMI, you can ask your bank to extend your loan tenure (e.g., from 15 years to 20 years). However, keep in mind that a longer tenure means you will pay more total interest.
- Balance Transfer: If another bank is offering a significantly lower interest rate, you can transfer your outstanding loan balance to them to save on interest costs.
- Negotiate with Your Bank: If you have a good CIBIL score (above 750), you can often negotiate a better interest rate with your lender.