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EMI CALCULATOR
(EMI calculator for Car
Loan / Home Loans / Auto Loans / Personal Loans / Education Loans )
EMI Calculations - EVERYTHING YOU WANTED TO KNOW
What is an EMI?
EMI is a short version
for Equated Monthly Installments. Thus, EMI is
what you pay every month towards repayment of your loan. EMI
for a given loan amount depends on number of factors including the
loan amount, the rate of interest and the tenure of the loan. For a
given loan amount and interest rate, your EMI can be lower if you
increase the loan tenure. Your EMI comprises an interest
component and a principal component.
Different types of retail loans are offered by all
major banks
in India (Retail Loan schemes of SBI, PNB, ICICI Bank, HDFC Bank, IDBI Bank, Bank
of India, Bank of Baroda, Corporation Bank are available at respective websites.
However, these banks use the same EMI formula for arriving at the monthly
installments. There can be minor variations owing to the
method adopted for the initial payments or the timing of the
installment during the month).
EMI
Calculator / EMI Calculator for Car Loan / EMI Calculator for
Housing Loan
EMI
calculation is not very simple. Most of the retail borrowers depend on EMI
calculator or Ready recknor charts to know the monthly installments
for their loans. We give below a SPECIAL EMI
CALCULATOR for comparing various options. This EMI Calculator is useful to know the monthly
installments for Housing Loan / Consumer Loan / Personal Loan. This EMI
calculator can be used for comparing the
approximate monthly Payments based on a various levels of loan amount, various period of loan and
various interest rates.
Best EMI Calculator to Compare Your Monthly Instalments
On a Single Page
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Compare Your EMI
At Various Rates of Interest and Various Loan
Amounts and Various Repayment Period |
Repayment Period
(in
Months) |
Rate
of Interest Payable |
Loan
Amount |
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EMI
or Monthly Repayment |
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This EMI Calculator gives a close
approximation of loan repayments, but actual amount may differ
from Bank to Bank, as different Banks sometimes use slightly different
methods for EMI calculations.
EMI FORMULA /
EMI CALCULATIONS
Why
EMIs are Popular?
EMIs are popular both with
the borrowers and lenders. Borrowers prefer them as they know precisely how
much money they will need to pay toward their loan each month. This helps
them making the personal monthly budgeting process easier. Lenders are able
to monitor the repayments easily and any default is repayment can be easily
detected.
How to Calculate my
EMI for a Loan ?
The formula for EMI
is a bit complex and thus not only most of the general public, but even hard
core bankers are generally not aware of the method for calculation of the
EMI. Bankers either depend on the Ready reckonar circulated by their Banks
or some ready made calculator provided by the bank in the shape of software /
utility.
Let us first
understand how does the banks calculate interest and principal payments from
each EMI. The most important point you have to understand is that EMI
consists of repayment of an unequal combination of principal and interest
rate. In the initial years of loan repayment, interest payments for major
portion of the EMI while the principal amount is much less. However, towards
the end of the repayment tenure, it is more of the principal that is being
repaid, and only small portion is the interest.
Thus, though the
EMI remains constant every month, one pays a higher component of interest when
he / she began repaying the loan and a higher component of principal towards
the end.
We will discuss
below the formula and other excel utilities available for detailed calculation
of EMIs.
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Some Tips for Loans taken under EMI:
(a)
Check
if your bank / financer allows you to make early / pre-payment without a
penalty clause. If yes, you can
prepay part of the loan if and when you have some extra funds, and ask
your banker to reschedule the EMI. In such cases the EMI will reduce or
you can opt for reduction in the tenure of the remaining loan period. You
will be able to save some costs in the shape of interest. . In this case,
it is obvious that the amount of your remaining EMIs won't remain the same
if you leave the duration of your loan constant.
(b)
Most
of the loans are sanctioned under floating rate schemes. Thus
interest
rate keeps on changing. As EMI is a function of the rate of interest,
thus whenever there is change in rate of interest, the EMI amount is also
likely to change. Check with your bank, whether in cases where interest
rates go up, you have the option of increasing the tenure of the
repayment or EMI has to be compulsorily increased.
(c ) Some
banks gives the borrower of flexi EMIs. Under these schemes, the borrower
is allowed to opt for a loan where the EMI keeps increasing over the
years. For example, let's say you have a 10 year loan. The EMI may remain
constant for first three years, then rises for the next three years and
rises again for the last four years. This type of option is suitable to
youngsters who can not afford high EMI at present, but hopes that with
rise in salaries, will be able to afford higher EMIs at a later stage.
Formula for Calculation of EMI :
We have already mentioned elsewhere that this
formula is a bit complex. A person with not much background of
mathematics will find difficult to understand or make use of the same.
However, the mathematical formula for calculation of EMI is as under :
EMI = (p*r) (1+r)^n
___________
(1+r)^n -
1
- p = principal (amount
of loan)
- r = rate of interest
per instalment period, i.e., if interest is 12% p.a. r = 1,
- n = no. of
installments in the tenure,
- ^ denotes whole to
the power.
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EMI CALCULATOR IN EXCEL :
Now
a days Excel is very popular and frequently people use it for calculations.
People who are familiar with EXCEL can use. PMT formula is used to know the
EMI. IPMT is used to know the interest portion in the EMI of a particular
instalment. Similarly, PPMT is used to know the principal component in the
EMI of a particular installment. We give below the details as to how to use
PMT formula in excel.
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PMT
(Source : EXCEL Help File) |
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Calculates the payment for a loan based on constant payments and a
constant interest rate. Syntax
PMT(rate,nper,pv,fv,type)
For a more complete description of the arguments in PMT, see the PV
function.
Rate is the interest rate for the loan.
Nper is the total number of payments for the loan.
Pv is the present value, or the total amount that a series of
future payments is worth now; also known as the principal.
Fv is the future value, or a cash balance you want to attain
after the last payment is made. If fv is omitted, it is assumed to be 0
(zero), that is, the future value of a loan is 0.
Type is the number 0 (zero) or 1 and indicates when payments
are due.
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Set
type equal to |
If
payments are due |
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0 or omitted |
At the end of the period |
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1 |
At the beginning of the period |
Remarks
- The payment returned by PMT includes principal and
interest but no taxes, reserve payments, or fees sometimes associated
with loans.
- Make sure that you are consistent about the units
you use for specifying rate and nper. If you make monthly payments on a
four-year loan at an annual interest rate of 12 percent, use 12%/12 for
rate and 4*12 for nper. If you make annual payments on the same loan,
use 12 percent for rate and 4 for nper.
Tip To find the total amount paid over the duration of the
loan, multiply the returned PMT value by nper.
Example 1
The example may be easier to understand if you copy it to a blank
worksheet.
- Create a blank workbook or worksheet.
- Select the example in the Help topic.
Note Do not select the row or column
headers.
Selecting an example from Help
- Press CTRL+C.
- In the worksheet, select cell A1, and press CTRL+V.
- To switch between viewing the results and viewing
the formulas that return the results, press CTRL+` (grave accent), or on
the Tools menu, point to Formula Auditing, and then click
Formula Auditing Mode.
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A |
B |
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Data |
Description |
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8% |
Annual interest rate |
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10 |
Number of months of payments |
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10000 |
Amount of loan |
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Formula |
Description (Result) |
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=PMT(A2/12, A3, A4) |
Monthly payment for a loan with the above
terms (-1,037.03) |
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=PMT(A2/12, A3, A4, 0, 1) |
Monthly payment for a loan with the above
terms, except payments are due at the beginning of the period
(-1,030.16) |
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Example 2
You can use PMT to determine payments to annuities other than loans.
The example may be easier to understand if you copy it to a blank
worksheet.
How
to copy an example
- Create a blank workbook or worksheet.
- Select the example in the Help topic.
Note Do not select the row or column
headers.
Selecting an example from Help
- Press CTRL+C.
- In the worksheet, select cell A1, and press CTRL+V.
- To switch between viewing the results and viewing
the formulas that return the results, press CTRL+` (grave accent), or on
the Tools menu, point to Formula Auditing, and then click
Formula Auditing Mode.
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A |
B |
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Data |
Description |
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6% |
Annual interest rate |
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18 |
Years you plan on saving |
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50,000 |
Amount you want to have save in 18 years |
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Formula |
Description (Result) |
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=PMT(A2/12, A3*12, 0, A4) |
Amount to save each month to have 50,000 at
the end of 18 years (-129.08) |
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Note The interest rate is divided by 12 to get a monthly rate.
The number of years the money is paid out is multiplied by 12 to get the
number of payments. |
Whether you can afford Loan
/ EMI ?
When you
approach a Bank for loan, the first thing, they are interested is what is
income? This is needed by the banker / financer to know whether you will be
able to repay the EMI.
They objectively look at your
income to determine whether or not you can afford to pay the EMI. Depending
upon the type of loan bankers allow upto various percentage of the income as
EMI. Mostly, they will allow the EMI to upto 35% to 40% of your gross
monthly income for consumer / vehicle loan etc. This is allowed even beyond
50% in case of Housing Loans. However, there are many other factors which
determine the maximum EMI you are likely to afford. For example, a young
newly married couple with both working (with no dependents and children) can
afford higher EMI, then a single person with dependent parents.
TIP : (a) If
you are taking an education loan or home loan, you can get tax benefits on
interest / principal repayments. Thus, you can afford higher EMI as your
tax liability is reduced. Moreover, in such cases you may like to stretch out
these payments over time so that you can avail of tax benefits over a longer
period. In this way, your EMI too will be smaller. However, in case of
personal loan or a vehicle loan – such tax benefits are not available.
.(b) If you expect big pay hikes
in the coming years, you may be able to afford higher EMIs at a later stage.
Thus, you can opt for flexi EMI scheme if the same are available
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