The complexity of everything related to loans may deter you from understanding its aspects. However, there are a lot of aspects that only appear to be complex. One of the reasons that you may believe that loans are complicated is because of not knowing a few simple things. One of the most important aspects of a loan is the EMI. You may be able to find the EMI of the loan easily by using a loan calculator. But, do you know the different types of formulas used in the calculation? Let’s check them out

EMI Calculation Formula

One of the first things that you should know is that there are different formulas to calculate EMI depending on the type of the loan. For example, the EMI for a car loan and EMI for an education loan are calculated in different ways. The method used to calculate the EMIs for car loan is known as the Flat Rate Method. The formula for calculation EMI through flat rate method is:

EMI = (Principal Amount X Number of Years X Interest Rate Per Annum)/Number of Instalments

However, if you needed to calculate the EMIs for an Education Loan then you will have to used the Reducing balance method. The EMI calculation formula for reducing balance method is:

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

In the above formulae, P is the Education Loan Amount, R is the Interest Rate per month, and N is the Tenure of the Education Loan. To determine the interest rate per month, the formula is:

Interest rate per month = Interest rate per installment x Outstanding loan amount

Customizable EMIs with PaySense

If you require a loan, then it would be best to avoid banks, unless you are fine with endless trips to the branch and waiting for months to get an approval. However, if you do not want any hassle, then the best option for you is PaySense. By using the PaySense mobile app you can avail a loan up to Rs. 2 lakhs instantly. Moreover, you can customize the amount and number of EMIs that you want for the loan. Additionally, you can decide this by using their online loan calculator.