EMI Calculator

# What are the main reasons that can change your EMI during the loan tenure?

A loan is a great way to satisfy all your financial requirements, especially if you require a large amount on short notice. While the loan application process has now been made easy, there are certain factors you still need to consider. For one, the EMI of the loan needs to be considered.

Equated monthly installments, known as EMI, determines the amount you will need to pay on a monthly basis in order to repay back the borrowed funds, along with the added interest. By using the EMI calculator, you can calculate the ideal amount that suits your needs while allowing you the flexibility to repay back the loan. However, at times, this EMI amount can also change during the tenure of the loan, which can affect your repayment process. But in order to be prepared for such a situation, you must understand the reason as to why this can occur. Given below are a few reasons as to why your EMI can change during your loan tenure:

Interest rate on your loan changes

Different loans come with different interest features. Loans such as the home loan come with an option of floating rate and fixed rate. While the floating rate depends on the current financial market conditions, fixed rates depend on the market condition at the time you are applying for the loan. Therefore, if you opt for a floating interest rate, the rate will be reset, depending on the lender you have approached for the loan. When this change occurs, it will also affect your EMI’s. By using the EMI calculator, you can calculate the possibility of each change that can occur for your interest rate. At the same time, you instruct your lender to adjust your loan tenure as opposed to your EMI in order to compensate for the modification.

Prepaying the loan

Plenty of lenders offer the feature to prepay a loan well before its loan tenure. However, EMI’s are calculated based on the principal amount, interest rate, and the loan tenure. In this case, the principal amount will be lowered, whereas the interest calculated on the new principal amount will change. In other words, prepaying your loan will change the loan tenure, which in turn will change the EMI’s. However, at the same time, you may need to pay a prepayment penalty, which can depend on the amount you pay prepay. To avoid such a situation, you must use the EMI Calculator and calculate the ideal amount that will prevent this situation.

You opt for progressive EMI’s

Some lenders offer the benefit of repaying a loan through staggered EMI’s. Through this process, you can opt for a fixed EMI for a particular tenure. After the term has passed, you will need to pay larger EMIs. This is an ideal option for individuals who have just started to work and are unable to afford large EMIs until they grow in their profession.