When you are applying for a loan, you conduct a lot of research such as finding the lowest interest rate, the exact tenure of the loan, and EMIs. However, EMIs are crucial to repayment of your loan as it is the amount that you owe then lender each month. So, if you know the interest rate and tenure, you can find the EMI using EMI calculator, right? Well, not exactly, you will also need to find the method calculating EMI. Yes, there are two methods: the Flat Interest Rate and the Reducing Balance Interest Rate. If you want to know about flat interest rate, here it is; while below is the insight into reducing balance interest rate and reducing EMI Calculator.

Reducing Balance Interest Rate

Reducing balance interest rate means that the interest is calculated on the remaining loan amount of the initial loan amount. Therefore, the interest for different months is different.

You can find reducing EMI calculator online but here is the mathematical formula:

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

Here the Principal Loan Amount is P, the Rate of Interest (on a monthly basis) is R, and the Tenure or the loan duration in months is N. Here is how the interest is calculated:

Suppose Rohini borrows a sum of INR 1.50 Lakhs with 10% interest rate for 3 years.

The yearly interest would be INR 15,000 and hence the interest for 3 years would be INR 45,000.

For the same example, if we calculate using the reducing EMI calculator:

EMI = [150000 x 10/(100*12) x (1.0083)^36]/[{(1.0083)^36}-1]

       = {1250 x 1.3482}/0.3482

       = 4840

Easy Personal Loans at PaySense

You can now evade funding conundrums easily with PaySense personal loans. Avail amount up to INR 2 Lakhs instantly with minimal fuss and documentation. If you are thinking which interest calculating method will be applied, then put your mind to ease, flat interest rate method is for bike and car loans while everything else in reducing balance method. You should always use personal loan calculator to ensure whether the amount of the EMI is affordable or not. So, download the PaySense app if you need cash quickly, it does not matter whether you need for home improvement or buying kitchen appliances. PaySense guarantees a quick turn-around time and best interest rates based on your credit score.