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:

Unknown 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

Disability Insurance for Professionals said...

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HowToDoInJava.com said...

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http://loan-emi.com/loan-emi-calculator/

Unknown said...

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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

Unknown said...

Nice and interesting information and informative too. Can you pls let me know the good attraction places we can visit home loan without document. Please refer : home loan emi calculator

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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Thomson John said...

Hey,

Nice and Informative article on EMI calculations. Above article in details explain the way to calculate EMI and different terminologies in EMI. Informative Article. Thanks Again for Sharing. I would also like to share some informative article with your fabulous readers. Please also check Finance Calculator Apps for Android .

Thanks
Thomson John