Question 1

What is EMI?

Accepted Answer

EMI stands for Equated Monthly Installment. It is the fixed amount you pay every month to repay your loan, which includes both the principal amount and the interest charged by the lender.

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 loan tenure in months.

Question 3

Can I reduce my EMI?

Accepted Answer

Yes, you can reduce your EMI by making a larger down payment, negotiating for lower interest rates, making prepayments, or extending the loan tenure. However, extending tenure increases total interest paid.

Question 4

What is an amortization schedule?

Accepted Answer

An amortization schedule is a table that shows the breakdown of each loan payment into principal and interest components, along with the remaining balance after each payment.

Question 5

Should I choose a shorter or longer loan tenure?

Accepted Answer

Shorter tenure means higher EMI but lower total interest paid. Longer tenure means lower EMI but higher total interest. Choose based on your monthly budget and financial goals.

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