What is an EMI?
EMI is a short version for Equated Monthly Installments. Thus, EMI is what you pay every month towards repayment of your loan. EMI for a given loan amount depends on number of factors including the loan amount, the rate of interest and the tenure of the loan. For a given loan amount and interest rate, your EMI can be lower if you increase the loan tenure. Your EMI comprises an interest component and a principal component. Different types of retail loans are offered by all major banks in India (Retail Loan schemes of SBI, PNB, ICICI Bank, HDFC Bank, IDBI Bank, Bank of India, Bank of Baroda, Corporation Bank are available at respective websites. However, these banks use the same EMI formula for arriving at the monthly installments. There can be minor variations owing to the method adopted for the initial payments or the timing of the installment during the month).
Formula for Calculation of EMI :
We have already mentioned elsewhere that this formula is a bit complex. A person with not much background of mathematics will find difficult to understand or make use of the same. However, the mathematical formula for calculation of EMI is as under :
EMI = (p*r) (1+r)^n
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(1+r)^n - 1
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You can find more information on http://allbankingsolutions.com/emi-calculator.htm
