How to Calculate EMI

Finding out the monthly instalment amount for borrowed loans is one of the foremost tasks that customers have on their mind while trying to obtain credit. Knowing your loan EMI before or after availing loan can be a real helper with respect to better financial planning.

Calculation of loan instalments isn’t a simple task because of the involvement of multiple variables. Hence, out of all the methods listed below the easiest and the simplest way is to calculate EMI using an online EMI calculator.

There are other ways too to calculate your monthly loan EMI so as anticipate certainly the expenditure that you would have for each month when you start repaying your loan. This enables you to plan your savings more effectively. Listed below are the three ways in which you can calculate your loan EMI.

• Using Online EMI Calculator

Using an online EMI Calculator is the easiest way to know your loan instalment. This tool takes in certain parameters like loan amount, interest rate, processing fee and loan tenure and process.

s this data to calculate your loan EMI amount. Not only can you feed in this information after you have availed your loan but you can also feed in your desired parameters to check if the resulting EMI amount is suitable to your pocket.

The latter option will help you in securing loan from the bank that is offering rates and fees which result in the most affordable EMI.

• Using Microsoft Excel

Microsoft Excel tool can also be used to calculate the loan installment for your loan. There are functions in Excel which help calculate different results. For EMI calculation, the function used is PMT. This functions takes in three variables for processing the EMI amount. These three variables are

        Calculate your Loan EMI

Rate = monthly rate of interest of loan

Number of periods, nper = number of EMIs

Present Value, pv = value of loan

Loan EMI = PMT (rate, nper, pv)

The function takes these three parameters and applies the PMT function to reach the final value of the monthly loan installment that you need to pay.

• Using Mathematical Formula

Wherever you cannot access a computer or the internet for calculation of loan EMI, there you can make use of the mathematical formula that helps you calculate the same.

This formula can be applied to reach the loan installment amount that you need to pay each month for repaying your loan.

Loan EMI amount = [P x R x (1+R)^N]/[(1+R)^N-1]

Here, P stands for Principal loan amount

R is the rate of interest per month

And N is the number of monthly installments

Calculating your loan EMI even before you have applied for loan is a great step towards planning your finances. It also helps customers to choose that particular bank which offers the most suitable EMI amount to them. Also, calculation of loan EMI beforehand helps customers to plan their monthly budget accordingly.

Despite the various ways to calculate loan EMI which are listed above, the best way which is least cumbersome is calculation of loan EMI via the online EMI calculator tool. This online tool furnishes fast results without any hassle of manual calculation.