EMI calculator is the tool that helps a borrower to calculate three main things, the EMI, the breakup and the amortisation table. Evaluation of these three things helps in creating a transparent picture in front of the person and makes him decide his affordability for the loan.
EMI- This is the basic and most important resultant of the EMI Calculator, as this calculation yields the basic answer of how much amount is to be paid monthly to the lender, with the inclusion of interest on it. With this detailing, the borrower, can judge whether he can pay back the fixed amount in the said period, or he needs to alter the time period or the loan amount.
The breakup- This includes the various parameters on which final amount of EMI calculated for the month. This again is very crucial for bringing transparency in the loan deal as it highlights the interest rate, processing fee, principal amount and other finances involved in the process.
Amortisation Table- This computation charts out the advancement of the loan with the increase in time period. It basically tells how much a person would have paid back to the lender by the end of the year. Also, it clarifies the questions related to interest rates for the initial EMIs and the principal amount, all of which can be easily done in an EMI calculator.
EMI calculation, brings a very detailed and futuristic information about the money borrowed and the money to be paid back at various stages of the loan tenure. The simple formula used by the EMI calculator is
Though, the EMI is meant to remain same during the entire loan agreement duration, but there are some situations on the basis of which, the EMI may vary.
First of all, in the case of change in interest rate, the amount initially calculated by the EMI calculator may differ from the sum that is to be paid at the variation time. This is generally applicable, when the borrower has opted for the scheme with a floating rate of interest, wherein, the changing repo rate of reserve bank is to be applied on the ROI of borrower’s loan.
Secondly, in case, the borrower decides to pay a certain heavy amount during the loan tenure, the EMI automatically comes down, as the principal amount reduces considerably. Thirdly, in case of the change in the term of the loan, either it is increased or decreased, the EMI is meant to change in accordance to the months re-opted for the payment by the debtor.
Lastly, there are schemes like Flexible EMI schemes, which allows the person to pay back the amount as per allowed by his pocket or with respect to the salary he earns. The change in EMI, here is in accordance to the changing salary of the debtor. Also, it is highly recommendable for the beginners who have just started with their career.