The EMI Calculation Process
An Equated Monthly Installment (EMI) is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. EMIs consist of both principal and interest components.
The Mathematical Formula:
The mathematical formula for calculating EMI is:
EMI = [P x R x (1+R)^N] / [(1+R)^N - 1]
Where:
- P: Principal Loan Amount
- R: Monthly Interest Rate (Annual Rate / 12 / 100)
- N: Number of Monthly Installments