Number of installments | Outstanding Principal (₹) | Principal Component (₹) | Interest Component (₹) | Repayment (₹) |
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"Loan Calculator" Supplementary Information

The "Loan Calculator" is used to calculate monthly loan repayments, total loan interest expenses, loan charts, and more without the need for MS Excel (spreadsheet).

There are various types of loans available in the market, including personal loan, credit card loan, auto loan, property loan and so on. Regardless of whether it is a personal loan, credit card loan, auto loan, or property loan the most important factor is the annual interest rate. How can you calculate the monthly repayment amount for a loan based on the annual interest rate? Detailed explanations will be provided below.

**Loan Calculations Based on Annual Interest Rate**

The formula for calculating loans based on the annual interest rate is as follows:

- A is the monthly repayment amount (or Equated Monthly Installment [EMI for short])
- P is the loan amount (how much money you borrowed)
- r is the annual interest rate of the loan (%) divided by 12, as there are twelve months in a year
- n is the number of repayment months

If I borrowed a loan of ₹50,000 from a bank with an annual interest rate of 5% and a repayment period of 36 months, then my monthly repayment amount would be:

There is another type of loan that is not calculated based on the annual interest rate but rather based on monthly flat rate. How should you calculate it, and what is the difference between monthly flat rate and annual interest rate?

The formula for calculating loans based on monthly flat rate is as follows:

- A is the monthly repayment amount
- P is the loan amount (how much money you borrowed)
- r is the monthly interest rate of the loan (%)
- n is the number of repayment months

If I borrowed a loan of ₹50,000 from a bank with a monthly flat rate of 0.14% and a repayment period of 36 months, then my monthly repayment amount would be:

In this example, with a monthly flat rate of 0.14% and a repayment period of 36 months, the actual annual interest rate is 3.22%.

For your convenience, this website has prepared a

Loan borrowers should be careful not to assume that the principal amount repaid each month is the same! Regardless of whether the bank/financial institution uses the "straight-line method" or the "Rule of 78", the proportion of interest paid is higher at the beginning of the repayment. Therefore, if you choose to repay early, you need to pay attention to the remaining principal and any early repayment fees that may be incurred.

I will explain what the "Rule of 78" means.

The "Rule of 78" is derived as follows:

It is named after using a 12-month repayment period. How does 78 come about? Let's see follows:

That's it, the total interest for the entire period is divided into 78 parts. In the first month, you pay 12/78 of the interest, in the second month, you pay 11/78 of the interest, and so on. Therefore, the proportion of interest to principal in the monthly repayments is not consistent, with more interest paid at the beginning and less interest paid later.

Example:

If you borrow a loan for period of 36 months:

Similarly, the total interest for a 36-month loan will be divided into 666 parts. In the first month, you pay 36/666 of the interest, in the second month, you pay 35/666 of the interest, and so on.

The calculation results from the "Loan Calculator" are for reference only. Before borrowing, you must first consult the relevant banks or financial institutions for accurate information!

Credit score rating (CIBIL score) is very important when you borrow money, it is because if your credit score rating is too low, you may not be able to borrow money! For more information about credit score rating, please visit the below websites:

CIBIL Score - How to Check, Calculate and Improve Credit Score

CIBIL Score | Credit Score | Credit Report | Loan Solutions | CIBIL

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