Saturday, February 28, 2009

How is EMI calculated?

The Equated Monthly Installment (EMI) of a loan is calculated according to the following formula.

EMI =
(P x i) (1+i)n
(1+i)n - 1

Where,
P is the loan amount
i is the monthly interest rate (i.e. the yearly interest rate divided by 12)
n is the loan tenure in months

For example, if you have a Personal Loan of 5 Lakhs (500,000) for an yearly interest rate of 13% and a tenure of 5 years, then,

P = 500,000
i = (13/100)/12 = 0.010833
n = 5 x 12 = 60

EMI =
(500,000 x 0.010833) (1+0.010833)60
(1+0.010833)60 – 1
= 11376.54

Thus the EMI of the loan is Rs. 11,377

15 comments:

Sonia Kamboj said...

It is quite time consuming to calculate EMI using formula to calculate EMI. Personal Loan EMI Calculator is an easy way to calculate the EMI. To calculate EMI, one need to submit details like interest rates, loan amount and loan tenure to the calculator and the calculator displays the EMI as a result.

Anonymous said...

@ Sonia Kamboj:-
without the above formula none of the software calculators will work.

PENNY STOCK INVESTMENTS said...

Great example

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HowToDoInJava.com said...

Hey Sujith, Thanks for sharing this info. You are already doing a good job here. You may like to visit a new tool I have created for EMI calculation for floating rate of interest.

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Anonymous said...

The Mathematical formula for calculating
EMI = [P x R x (1+R) ^n] / [(1+R)^ n-1].
P is the principal loan amount,
R rate of interest per month and
N is the the number of monthly instalments).
Manual calculations are too complicated to perform accurately, which is why many borrowers are left confused after availing a loan. Understanding this pain-point led BankBazaar to develop one of the easiest and most user-friendly EMI Calculator

Alex Smith said...

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Krunal said...

Easy way to calculate EMI, Mobile EMI Calculator:

iOS Links: https://itunes.apple.com/us/app/tools-and-calculators/id1155507458

Android Link: https://play.google.com/store/apps/details?id=com.eclatsol.toolsandcalculators

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Anurag Mishra said...

Use the interactive home loan emi calculator India to calculate your home loan EMI. Get all details on interest payable and tenure using the home loan calculator.

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