Real Meaning of Emi Calculation

What Does the Equated monthly Installment which is shortly and most prominently renowned all over the globe as the- EMI Mean?
A fixed payment of a certain tune made by the borrower or borrowers to the lender, usually a bank or any financial institution sat a specified time and date regularly on each calendar month. The Equated monthly installments are considered to be the best way to pay off both the interest and the principal each month. Therefore within recalculated specified number of months or years, borrower could pay off the loan\ completely.

Equated monthly Installment explained
With most of those common types of the loans, such as the real estate mortgagees, in which case the borrower makes a fixed periodic payments schedule assurance to the lender right over the course for specified number of years with the goal to retire the loan. EMIs usually differ from the variable payment plans in more than a few ways. In the case of those variable payment plans, borrower will be able to pay the higher payment amounts in case if he is having a good flourishing time of business, at his or her own discretion. While in the case of the EMI plans, the borrowers are usually restricted to only one fixed payment of already decided figures each month.
The benefit of the EMI for the borrowers is just the same. They know precisely on how much money they would need to pay for the repayment of their loan each month. This makes the personal budgeting tasks and processes easier.

EMI is equal to [(Pxr) * (1+r)n] divided by [(1+r)n-1]

Whereas,. The following notations stand for,

P = the Principal Loan Amount

r = the Annual Interest Rate that is for twelve months / 12

n = the total Number of the Monthly Installments

Where to use what?

As an alternative you could try the following formula as well to calculate the emi in a different way. As long as you get the precise value of the equal monthly installments, it does not really matter which one of the methods you do follow. Both the above one as well as the below one could be used according to your convenience. Also it depends upon the variety of applications for which you are going to use these formulae. There are specific instants which you could come across eventually when you deal with several of such cases, where and when to appropriately use the respective formula to achieve at the precise results of emi easily.

A1 – the Loan amount.
A2 – the Per annum irate of interest which is normally expressed in the percentage

A3 – the Tenure in months.
Equals to PMT (A2/12, A3,-A1)

Being precise

EMI quotes are extremely significant for so many reasons. There are numerous contexts where the EMI quotes find applications with. Unless and until you are having a good expertise in easily calculating the right values of the emi, it is always better to rely on a proper consultant for this purpose. That could avoid a lot of litigations which could arise otherwise with any miscalculations.

Leave a Reply

Your email address will not be published. Required fields are marked *