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Loans are the lender of the last resort for many individuals and it boosts up his financial position. But if you apply for any type of loan, you will have to pay the EMI until the expiry of the tenure. There are many individuals in India who are unaware of the EMI Full Form. The full form of EMI is Equated Monthly Instalment and it is paid by the borrower to the bank. The EMI is calculated on the basis of the Loan Amount, Tenure of the Loan, and the Rate of Interest Charged by the Bank on the Loan. The applicant borrows the loan from the bank in bulk but the banks give time to repay the loan in monthly instalments instead of paying it in full.
Details Needed to Calculate EMI
It is mandatory to know the Loan Amount, Interest Rate, and Tenure to calculate the exact EMI. You will get a better picture of all the terms below:
The loan amount is that amount you are willing to borrow from the bank. So, you have to provide the required loan amount while you are computing the Equated Monthly Instalment. The principal amount can increase or decrease your EMI. If you take a large amount of loan then your EMI would also be high.
Every bank charges a certain rate of interest on the loan taken by you. So, the Interest Rate is also needed to calculate the exact amount of EMI. The high-interest rate results in the computation of high EMIs.
Tenure in Months
While calculating the EMI you will also have to provide the tenure for which the loan has been taken. Suppose you have taken a loan for 7 years then you will have to provide this detail in months that is 84 months. So if you are willing to pay low EMI then increase the tenure of the loan but it will increase the overall amount of interest on your loan.
Formula Used in EMI Calculation
Every bank offers EMI Calculators to calculate the EMI but if you want to do a manual calculation then you can use the following formula:-
EMI = P x R x (1+R)^n/((1+R)^n-1)
You can calculate the EMI manually by applying the above-mentioned manual formula. You have to put the values at their respective places and start the calculations.
- Put the loan amount at the place of “P”.
- Insert the Rate of interest at the place of “R”
- Put tenure period at the place of “n”.
So, the EMI full form is Equated Monthly Instalment and you can calculate the EMI either using the EMI Calculator or the above formula. The EMI Calculators are fast and then calculate the EMIs within seconds whereas you will have to put a lot of effort while calculating the EMI manually using the manual formula.