Loans are one the primary products that banks provide to its customers. Loans essentially allow customers to buy or pay for something which they are not capable of paying at the time, but will be able to pay at a cumulative capacity. Banks at as a middleman paying the entire amount at once, and in exchange you pay the amount to the bank in instalments, but with interest. The interest is how the banks earn, as a fee for using their money for payment. So accordingly, the amount you pay the bank will include both the principle amount, and the interest amount.
How Do You Calculate Interest on a Loan?
There are different variables that allow you to calculate the interest on the loan amount, which are the principle amount, the rate of interest, and the tenure of loan.
Interest = loan principal * (Interest rate / no. of payments)
What are EMIs?
Easy Monthly Instalments is the amount paid by the loan borrower through the loan tenure period to pay off the loan amount. The EMI is made up of both the interest and the principal amount of the loan. So accordingly, EMIs are way to repay the loan amount on a monthly basis. Each EMI you pay contributes more towards the payment of your loan.
You can calculate EMIs manually by using the EMI calculation formula, which is EMI = [P x R x (1+R) ^N]/[(1+R) ^N-1]. In this formula, R = rate of interest, N = number of payments, and P = principle amount. How it works is, if your principle loan amount is 10,000, and the rate of interest and tenure are 10% and 6 months respectively, your EMI will be [10,000 * 10 * (1+10)^ 6 / (1+10) ^ 10 – 1, which comes to INR 1,715.
If you do not prefer calculating it manually, you can also use an EMI calculator to calculate your EMI automatically online. You can simply calculate your EMI using the online EMI calculator by entering your loan amount, your rate of interest, and your tenure. By entering these variables, the calculator will generate your EMI amount within seconds.
Does the Loan Calculator Provide Exact Details?
When it comes to Loan calculators, they work on a predetermined formula, which means that they might not be taking into account the different taxes or processing charges into account. However, if you want to be sure of exact details, try calculating your EMI from the online calculator provided by the bank that you have availed the loan from. Every bank provides emi calculators online, which include their charges and customized calculation formulas. These provide a much closer estimate than general EMI calculators.
Apply for Loans of upto ₹5 Lakhs easily using your phone or laptop, and pay back on low EMIs