Question 1

What is EMI?

Accepted Answer

EMI (Equated Monthly Installment) is a fixed payment amount made by a borrower to a lender at a specified date each month. EMIs are used to pay off both interest and principal each month so that over a specified number of years, the loan is paid off in full.

Question 2

How is EMI calculated?

Accepted Answer

EMI is calculated using the formula: EMI = P × r × (1+r)^n / ((1+r)^n - 1), where P is the principal loan amount, r is the monthly interest rate, and n is the number of monthly installments.

Question 3

Does prepaying a loan reduce EMI or tenure?

Accepted Answer

When you prepay a loan, you can choose to either reduce your EMI amount while keeping the same tenure, or reduce the tenure while keeping the same EMI. Reducing tenure typically saves more on interest.

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