EMI or Equated Monthly Installments have become an inseparable part of almost every person's life who has ever taken any kind of loan or used a credit card. They have become so common that people have a tendency to overlook their implications, which can often lead to financial distress. To avoid that, it is essential to get a clear understanding of the EMI calculation process.
What is EMI?
EMI means the fixed amount of money that a borrower needs to pay to the lender every month to pay off the loan amount along with the interest charged on it. It is a convenient way to repay the loan as the borrower does not have to pay a lump sum amount at once, which might not be feasible for everyone.
The EMI amount is calculated on the basis of the principal amount, the tenure of the loan, and the rate of interest charged by the lender. The formula to calculate EMI is:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Here, P is the principal amount, R is the rate of interest, and N is the number of monthly installments.
For example, if you take a loan of Rs. 1,00,000 for a tenure of 12 months at an interest rate of 10%, the EMI would be:
EMI = [100000 x 0.1 x (1+0.1)^12]/[(1+0.1)^12-1] = Rs. 8,885
The EMI calculation can be a bit complex, but it is essential to understand it thoroughly to avoid any financial trouble in the future.
Key Factors Affecting EMI Calculation
The EMI amount depends on various factors like the principal amount, tenure, and interest rate charged by the lender. Let's have a look at each of these factors:
1. Principal Amount - The EMI amount is directly proportional to the principal amount. Higher the principal amount, higher the EMI amount, and vice versa.
2. Tenure - The EMI amount is inversely proportional to the tenure of the loan. Longer the tenure, lower the EMI amount, and vice versa.
3. Interest Rate - The interest rate is the determining factor for the EMI amount. The higher the interest rate, the higher the EMI amount, and vice versa.
It is essential to keep these factors in mind while taking any loan so that you are aware of the EMI amount and plan your finances accordingly.
Benefits of EMI
EMI has various advantages for borrowers. Some of them are:
1. Affordability - EMIs make loan repayment affordable as the borrower doesn't have to pay a lump sum amount at once.
2. Convenience - EMIs make loan repayment convenient as the borrower can choose the tenure based on their financial capability.
3. Predictability - EMIs provide a predictable repayment schedule, which helps borrowers plan their finances better.
4. Credit Score - Timely payments of EMI help improve the credit score, which opens the doors for better loan options in the future.
Bajaj Finserv No Cost EMI Card
The Bajaj Finserv No Cost EMI Card is a unique card that enables customers to convert their purchases into easy EMIs without any additional cost. It offers several benefits to the customers like:
1. No Cost EMIs - With the Bajaj Finserv No Cost EMI Card, customers can avail of No Cost EMIs on a wide range of products from various categories like electronics, appliances, fashion, and more.
2. Multiple Tenures - Customers can choose the tenure that best suits their financial capability, ranging from 3 to 24 months.
3. Zero Down Payment - Customers can make purchases with Zero Down Payment, which means they don't have to pay anything upfront.
4. Easy Processing - The Bajaj Finserv No Cost EMI Card offers easy processing of loans with minimal documentation, making it hassle-free for the customers.
Using the Bajaj Finserv No Cost EMI Card, customers can make their purchases affordable and plan their finances better.
Tips for EMI Calculation
To make EMI calculation easier, here are some tips that borrowers can follow:
1. Use Online EMI Calculators - Several online EMI calculators are available that can help borrowers calculate their EMI amount and plan their finances better.
2. Negotiate with Lenders - Always negotiate with the lender for a lower interest rate, which will reduce the EMI amount and save money in the long run.
3. Opt for a Longer Tenure - Opting for a longer tenure might reduce the EMI amount, but it will increase the overall interest paid. Hence, it is essential to choose a tenure that balances affordability and the total interest paid.
4. Consider Prepayment - Prepayment is an option available to borrowers to repay their loan beforehand. It helps save on the total interest paid and can reduce the overall EMI amount.
Final Thoughts
EMI calculation can be a complex process, but it is essential to understand it thoroughly to avoid any financial distress in the future. The Bajaj Finserv No Cost EMI Card is an excellent option for customers to make their purchases affordable and plan their finances better. By following the tips mentioned above, borrowers can calculate their EMI amount with ease and take informed decisions on their finances.