Monthly Payment (EMI)
₹24,959
Total Interest Payable
₹34,90,279
Total Payment
(Principal + Interest)
₹59,90,279
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What is EMI?
Equated Monthly Installment – EMI for short – is the amount payable every month to the bank or any other financial institution until the loan amount is fully paid off. It consists of the interest on loan as well as part of the principal amount to be repaid. The sum of principal amount and interest is divided by the tenure, i.e., number of months, in which the loan has to be repaid. This amount has to be repaid monthly. The interest component of the EMI would be larger in the initial months and gradually reduce when compared to the principal amount. The exact percentage allocated towards payment of the principal depends on the interest rate. Even though your monthly EMI payment won’t change, the proportion of principal and interest components will change with time. With each successive payment, you’ll pay more towards the principal and less in interest.
Here’s the formula to calculate EMI:
where
E is EMI
P is Principal Loan Amount
r is rate of interest calculated on monthly basis. (i.e., r = Rate of Annual interest/12/100. If rate of interest is 10.5% per annum, then r = 10.5/12/100=0.00875)
n is loan term / tenure / duration in number of months
For example, if you borrow
10,00,000 from the bank at 10.5% annual interest for a period of 10 years (i.e., 120 months), then EMI =
10,00,000 * 0.00875 * (1 + 0.00875)120 / ((1 + 0.00875)120 – 1) =
Computing EMI for different combinations of principal loan amount, interest rates and loan term using the above EMI formula by hand is time consuming, complex and error prone. Our EMI calculator automates this calculation for you and gives you the result in a split second along with visual charts displaying payment schedule and the break-up of total payment.
How to use EMI calculator?
With colourful charts and instant results, our EMI calculator is easy to use, intuitive to understand and is quick to perform. You can calculate EMI for home loan, car loan, personal loan, education loan or any other fully amortizing loan using this calculator.
Enter the following information in the EMI calculator:
- Principal loan amount you wish to avail (rupees)
- Loan term (months or years)
- Rate of interest (percentage)
- EMI in advance OR EMI in arrears (for car loan only)
Use the slider to adjust the values in the EMI calculator form. If you need to enter more precise values, you can type the values directly in the relevant boxes provided above. As soon as the values are changed using the slider (or hit the ‘tab’ key after entering the values directly in the input fields), EMI calculator will re-calculate your monthly payment (EMI) amount.
A pie chart depicting the break-up of total payment (i.e., total principal vs. total interest payable) is also displayed. It displays the percentage of total interest versus principal amount in the sum total of all payments made against the loan. The payment schedule table showing payments made every month / year for the entire loan duration is displayed along with a chart showing interest and principal components paid each year. A portion of each payment is for the interest while the remaining amount is applied towards the principal balance. During initial loan period, a large portion of each payment is devoted to interest. With passage of time, larger portions pay down the principal. The payment schedule also shows the intermediate outstanding balance for each year which will be carried over to the next year.
Floating Rate EMI Calculation
We suggest that you calculate floating / variable rate EMI by taking into consideration two opposite scenarios, i.e., optimistic (deflationary) and pessimistic (inflationary) scenario. Loan amount and loan tenure, two components required to calculate the EMI are under your control; i.e., you are going to decide how much loan you have to borrow and how long your loan tenure should be. But interest rate is decided by the banks & HFCs based on the Repo Rate set by RBI. As a borrower, you should consider the two extreme possibilities of increase and decrease in the rate of interest and calculate how much would be your EMI under these two conditions. Such calculation will help you decide how much EMI is affordable, how long your loan tenure should be and how much you should borrow.
Optimistic (deflationary) scenario: Assume that the rate of interest comes down by 1% – 3% from the present rate. Consider this situation and calculate your EMI. In this situation, your EMI will come down or you may opt to shorten the loan tenure. Ex: If you avail home loan to purchase a house as an investment, then optimistic scenario enables you to compare this with other investment opportunities.
Pessimistic (inflationary) scenario: In the same way, assume that the rate of interest is hiked by 1% – 3%. Is it possible for you to continue to pay the EMI without much struggle? Even a 2% increase in rate of interest can result in significant rise in your monthly payment for the entire loan tenure.
Such calculation helps you to plan for such future possibilities. When you take a loan, you are making a financial commitment for next few months, years or decades. So consider the best as well as worst cases…and be ready for both. In short, hope for the best but be prepared for the worst!
Further Reading
- Budget 2013: Tax exemption on home loan interest amount raised (Mar 15, 2013)
- Understanding tax benefits on home loan (Sep 16, 2012)
- Penalty on pre-payment and foreclosure of home loan – a thing of past? (Jun 11, 2012)
- SBI and ICICI Bank end pre-payment penalty on home loans (Nov 25, 2011)
- Cap for 1% interest subsidy raised – Should we cheer? (Oct 28, 2011)
- NHB bans prepayment penalty on home loans by HFCs (Oct 21, 2011)
- Rate race in home loan market heats up (Sep 30, 2011)
- House value depreciation – what to expect if this happens (Sep 26, 2011)
- Prepayment penalty for floating interest home loans should end: RBI (Sep 11, 2011)
- Dual Rate Home Loans – Are they better than floating rate loans? (Sep 6, 2011)
- 5 things you should know about personal loans (Jul 13, 2012)
- EMI in advance vs. EMI in arrears (May 1, 2013)
- RBI announces rate cut; Loans set to become cheaper (Jan 30, 2013)
- How to read your CIBIL credit report? (Jan 1, 2013)
- CIBIL Score – An Introduction (Nov 12, 2012)
- RBI rate cut – Will it help the borrowers? (Apr 19, 2012)
- EMI Option – Boon or Bane (Feb 29, 2012)
- RBI’s 13th rate hike in 20 months – will it pause & continue OR end & reverse? (Oct 30, 2011)
- News Roundup – Oct 7, 2011 (Oct 7, 2011)
- RBI hikes interest rates for 12th time in 18 months; loan EMIs to go up (Sep 16, 2011)
- How much EMI can you afford? (Aug 17, 2011)
- 4 circumstances that can impact your EMI (Aug 16, 2011)