EMI Calculator: In today’s era, most of the people have taken various types of loans. These include home loan, car loan, education loan and personal loan borrowers. Apart from this, many electric, electronics items including mobiles, laptops are also being taken on loan. For these, we have to pay a fixed amount every month, in which simple language is called EMI. Today everyone knows this word. But do you know how it is calculated? Yes, read it right. It also has a calculation and according to that we should be able to pay it. Here we are going to give you a lot of useful information regarding EMI calculator.
what is emi
Equated Monthly Installment (EMI for short) is the amount that is payable to the bank or any other financial institution every month till the loan amount is fully repaid. This includes the interest on the loan as well as part of the principal amount to be repaid. The sum of the principal and interest is divided by the tenor, i.e. the number of months in which the loan has to be repaid. This amount has to be paid every month. The EMI interest will be large during the initial months and will gradually reduce with each payment. The exact percentage allotted for repayment of principal depends on the interest rate. Even though your monthly EMI payment will not change, the ratio of principal and interest components will change over time. With each successive payment, you’ll pay more toward principal and less in interest.
Formula to Calculate EMI
P is the principal loan amount
r is the interest rate calculated on a monthly basis. (ie, r = rate of interest per annum/12/100. If the rate of interest is 10.5% p.a., then r = 10.5/12/100=0.00875)
n is the loan tenure/term/period in the number of months
For example, if you borrow ₹10,00,000 from a bank at 10.5% p.a. interest for a tenor of 10 years (ie 120 months), then EMI = ₹10,00,000 * 0.00875 * (1 + 0.00875)120 / ( ( 1 + 0.00875)120 – 1) = ₹13,493. That is, you have to pay ₹13,493 for 120 months to repay the entire loan amount. The total amount payable will be ₹13,493 * 120 = ₹16,19,220 which includes ₹6,19,220 as interest on the loan.
Using the above EMI formula, EMI is calculated either by hand or by MS Excel for various combinations of principal loan amount, interest rates and loan tenure. Our EMI calculator automates this calculation for you and gives you the results in the second section along with a visual chart showing the payment schedule and a break-up of the total payment.
What will be the EMI in 3 year car loan, see calculation
If you have taken a loan of Rs 5 lakh for 3 years, then by increasing the interest rate, how much will the EMI of your loan increase, know here.
Here is the car loan calculation
Loan amount – Rs. 5 lakh
Loan tenure – 3 years
Interest Rate – 7.35 percent p.a.
EMI – Rs.15,519
Total interest for the period – Rs 58,673
Total Payment – Rs.5,58,673
Expected EMI after rate hike –
Loan amount – Rs. 5 lakh
Loan tenure – 3 years
Interest Rate – 7.75% p.a. (0.40% increased rate)
EMI: Rs 15,611
Total interest for the period – Rs 61,981
Total Payment – Rs.5,61,981
Before taking a loan, you need to check how much you have to pay per month, EMI. This will decide how much you can borrow. While calculating EMI, it is important to know the total amount, tenure, total repayment of the loan.
How to use EMI calculator
With color charts and instant results, our EMI calculator is easy to use, easy to understand and quick to perform. You can calculate EMI for home loan, car loan, personal loan, education loan or any other full amortization loan using this calculator.
Enter the following information in the EMI calculator
– Principal loan amount you want to get (Rs.)
– Loan term (months or years)
– interest rate (percentage)
– EMI in advance or EMI outstanding (only for car loan)
How to use calculator
Use the slider to adjust the values in the EMI calculator form. If you need to enter a more precise value you can type the value directly into the box above. EMI Calculator will re-calculate your Monthly Payment (EMI) amount as soon as the value is changed using the slider (or directly press the ‘Tab’ key after entering the value in the input field).
Pie chart is also shown
A pie chart showing the details of the total payment (i.e., total principal versus total interest payable) is also displayed. It displays the percentage of total interest versus principal amount to the sum total of all payments made against the loan. A payment table showing the payments made every month/year for the entire loan tenure is displayed along with a chart showing the interest and the principal paid each year. A portion of each payment is for interest while the remaining amount is applied for principal. During the initial loan term, a large portion of each payment is devoted to interest. With the passage of time, large portions pay off the principal. The payment schedule also shows the intermediate dues for each year that will be carried over to the next year.
Floating Rate EMI Calculation
We suggest that you calculate the floating/variable rate EMI keeping in mind the two opposite scenarios, i.e. optimistic (deflationary) and pessimistic (inflation) scenario. The loan amount and loan tenure, EMI calculation is under your control. You decide how much loan you want to take and how long your loan tenure should be. As a borrower you should consider the two possibilities of increase and decrease in the interest rate. You should calculate your EMI under these two conditions. Such a calculation will help you decide how affordable the EMI is. What should be the tenure of your loan and how much should you borrow.
Optimistic (deflationary): Assume that the interest rate decreases by 1% – 3% from the current rate. Consider this situation and calculate your EMI. In this case, your EMI will be reduced or you can choose to shorten the loan tenure. Example: If you take a home loan to buy a home as an investment, the optimistic outlook enables you to compare it with other investment opportunities.
Pessimistic (Inflation): In the same way, let’s say the interest rate is increased by 1% – 3%. Is it possible for you to continue paying EMIs without much struggle? Even a 2% increase in interest rate can result in a significant increase in your monthly payment for the entire loan term.
Such calculations help you to plan for such future possibilities. When you take out a loan, you are creating financial management for the next few months, years or even decades. So consider both the best and the worst and be prepared for both.
Posted By: Navodit Saktawat