# Loan Calculator

## Loan Calculator Explained

A loan is a legal agreement between a borrower and a lender whereby the borrower receives a sum of money (the principal) they must repay later. The majority of loans fall into one of three categories:

## Use of Loan Calculators

Use the loan calculator to calculate your monthly payment, interest rate, length of the loan, or principal balance. By varying the loan amount, interest rate, and period and seeing the impact on the payment amount, you may determine your optimal payment.

To understand how your monthly payment will pay off the loan principal + interest throughout the loan, you can also construct and print a loan amortisation schedule.

## Calculating loans

When you take out a loan, you must repay the amount plus interest to the bank every month. Therefore, a loan can be compared to an annuity you pay to a lending institution. The present value of an ordinary annuity formula can be used to calculate loans:

**PV=PMTi[1−1(1+i)n]**

PV is the loan amount

PMT is the monthly payment

i is the interest rate per month in decimal form (interest rate percentage divided by 12)

n is the number of months (term of the loan in months)

## How Does the EMI Calculator Work?

Our EMI Calculator is quick, simple, and intuitive to grasp with colourful charts and instant results. Using this calculator, you may determine the EMI for a home loan, vehicle loan, personal loan, education loan, or any other fully amortising loan.

**Fill out the EMI Calculator with the following data:**

- Your desired principal loan amount (rupees)
- loan period (months or years)
- Interest rates (percentage)

## EMI in arrears OR EMI in advance (for car loans only)

To change the settings in the EMI calculator form, use the slider. You can type the values in the pertinent areas above if you need to provide more accurate ones. The EMI calculator will update your monthly payment (EMI) amount as soon as the settings are modified using the slider (or after putting the values straight into the input fields by pressing the "tab" key).

A pie chart also shows the breakdown of the entire payment (total principle vs total interest payable). The total of all loan instalments shows the ratio of interest payments to the principal as a percentage. Along with a chart illustrating the interest and principle components paid each year, the payment schedule table displays payments made each month or year for the loan term. Each payment consists of an element for the principal balance and a portion for the interest. Each payment made during the initial loan period includes a sizable interest. As time goes on, more significant parts reduce the main. The payment plan also displays the carryover amount for each year's intermediate unpaid balance.

## Calculation of the Floating Rate EMI

We advise you to factor in two opposing possibilities when calculating floating or variable rate EMI: an optimistic (deflationary) scenario and a pessimistic (inflationary) scenario. You will choose how much money you need to borrow and how long your loan term should be. Loan amount and loan tenure are two factors required to compute the EMI. However, banks and HFCs choose interest rates based on the rates and guidelines set by the RBI. It would help if you added your EMI as a borrower considering the two extreme scenarios of an increase and a drop in the interest rate. This calculator will assist you in determining your budget-friendly monthly payment, the ideal loan term, and the appropriate borrowing amount.

**Optimistic (deflationary) scenario:** Assume that the interest rate decreases from its current level by 1% to 3%. Calculate your EMI is taking this circumstance into account. For instance, a favourable situation allows you to compare buying a house as an investment with other alternatives. Your EMI will decrease in this case, or you might choose to reduce the loan's term.

**Pessimistic (inflationary) scenario:** In a similar vein, consider that the interest rate is increased by 1%–3%. Your monthly payment for the duration of the loan could significantly increase with even a 2% increase in the interest rate. Do you think you'll be able to keep making EMI payments without too much difficulty?

Making such a computation aids in planning for such potential future events. When you take out a loan, you're committing to a certain amount of money for the upcoming months, years, or decades. Think about the best and worst case scenarios, and prepare for both. In other words, expect the best while preparing for the worse!