How To Use EMI Calculator?
Loan calculators can help compute EMIs for your home loans, personal loans and business credit. Here is how an online EMI calculator works.
- 1 Enter the principal amount in the relevant field marked on a loan EMI calculator
- 2 Next, enter the chosen tenure in the online EMI calculator. Depending on the calculator, tenor can be entered in either months or years
- 3 Put in the interest rate as quoted by your preferred lending institution
With this information in place, click on ‘calculate’ to assess monthly EMIs, along with total interest due and the cost of loan.
In some cases, an EMI calculator may have sliders instead of fields to enter the required figures. Adjusting the sliders to enter the desired range yields the necessary results. An EMI calculator for personal loan or home loan comes with a tenor slider, which ranges up to the maximum value offered by the particular financial institution.
Whether using an EMI calculator for business loan or any other type of credit, the EMI formula remains the same.
EMI = P x R x (1+R)^N / [(1+R)^N-1]
In this equation,
P = Loan principal
R = Interest rate
N = Loan repayment tenor (in months)
Manual EMI calculation is complicated and time-consuming. Due to its complexity, manually computing instalments can also lead to errors. An EMI calculator presents a simpler way to derive such results.
Besides EMI and interest outgo, EMI calculators also project the amortisation schedule for a loan.
Amortisation Schedule
Amortisation schedule is the complete breakdown of loan EMIs into principal and interest components. Consider the following example:
A personal loan of Rs. 10 lakh at 12% for 1 year will have the following amortisation schedule.
Month |
Opening Balance (Rs.) |
Interest Paid (Rs.) |
Principal Repaid (Rs.) |
Closing Balance (Rs.) |
1 |
10,00,000 |
10000 |
78849 |
921151 |
2 |
921151 |
9212 |
79637 |
841514 |
3 |
841514 |
8415 |
80434 |
761080 |
4 |
761080 |
7611 |
81238 |
679842 |
5 |
679842 |
6798 |
82050 |
597792 |
6 |
597792 |
5978 |
82871 |
514921 |
7 |
514921 |
5149 |
83700 |
431221 |
8 |
431221 |
4312 |
84537 |
346685 |
9 |
346685 |
3467 |
85382 |
261303 |
10 |
261303 |
2613 |
86236 |
175067 |
11 |
175067 |
1751 |
87098 |
87969 |
12 |
87969 |
880 |
87969 |
0 |
Studying this amortisation schedule reveals that the interest charge on a loan decreases as the tenor progresses while the principal component keeps increasing. Such a breakdown also shows how EMI remains constant even when the two component values keep changing each month.
Amortisation schedule is an essential component of an EMI calculator for home loan. Such credit comes with a significant tenor. An amortisation schedule helps determine the period during which the maximum interest charges are levied.
Factors that impact your EMI
Your equated monthly instalment (EMI) is calculated based on three elements – the total amount you choose to borrow, the interest rate and the tenure. Therefore, before applying for a loan, you should consider these factors based on your economic outstanding and repayment capacity.
Loan amount
This is the total amount you choose to borrow and plays a significant role in determining your EMI. Hence, select this amount wisely to ensure easy and timely repayment without delays.
Tenure
Choosing an appropriate tenure is also a crucial decision. Always decide your tenure after analysing your financial stability. Remember, a longer tenure will result in lower EMIs but will increase your overall loan value. On the other hand, a shorter tenure will increase your EMI value but will help you clear the loan faster.
Interest rate
The last component that determines your EMI is the rate of interest. The lower your interest rate, the lower your total EMI outgo. Therefore, pick a lender that offers you the best interest rate.
Frequently asked questions
EMI stands for equated monthly instalment. It is the monthly amount that you have to pay when opting for any type of loan. The entire loan amount, along with interest liabilities, is broken down into smaller monthly sums. The tenor, principal and interest rate charged are crucial parameters for EMI computation.
The formula for EMI calculation is as follows:
EMI = P x R x (1+R)^N / [(1+R)^N-1], where P is the principal, R is the rate of interest and N is the tenor.
Enter principal, tenor and rate of interest to calculate EMIs payable, total interest payable and get a detailed amortisation schedule.
Accordion Description (Using an EMI calculator is simple. Enter the loan amount you wish to avail, repayment term and loan interest rate quoted. After that, click on 'calculate'. Doing so should provide an answer instantaneously. These tools are available for free and can be used any number of times.
