How to Calculate your EMI on Personal Loan - Calculate your EMI - Tata Capital

How to Calculate your EMI on Personal Loan

Feb 27, 2017

Suppose that due to some urgent requirement, you borrow Rs 3 lacs from the bank. The personal loan interest rate in your case is 15% and you are paying an EMI of Rs 10,400 per month for a period of 3 years. Whether this amount is correct or not, how much interest is being paid every month, how much principal is being repaid every month are some questions, for which you don't have answers.

So it is in your benefit to understand how banks calculate your loan EMIs.

As you already know, EMI is a fixed monthly amount that you need to pay every month till the loan is cleared off. The biggest benefit of EMI is that you know exactly how much you need to pay every month. This helps in proper planning of your personal finances in advance.

Personal Loan EMI Calculations depend on the following:

  • Loan Amount
  • Interest Rate
  • Loan Tenure

There are several personal loan EMI calculators available online that you can use to calculate your EMIs. Or you can even use a simple formula in MS Excel software.

The function that needs to be used in Excel is PMT. To calculate EMI on your personal loan use:

= PMT [(Annual Interest Rate)/12, Number of EMIs, Loan Amount]

So for instance, the EMI for a principal amount for Rs 3 lacs borrowed at 15% interest for 3 years (36 months) is Rs 10,400.

Now each EMI includes contributions towards both principal and interest on the loan amount. To know more about each part, what is required is a Loan Amortization Schedule. It is a tabular representation of loan repayment schedule along with all details like break up between the interest and principal component of each EMI. One glance at the schedule tells exactly how the loan is being repaid and how much is the exact outstanding left to be paid.

In initial stages of the loan, the interest component forms the major portion of the EMI. But as you progress along, the portion of interest repayment reduces and principal repayment increases.

Since we are talking about Personal loans, it is important to note that personal loans interest rates are generally fixed. So the EMI payment remains constant during the tenure. In case of floating rate loans, the EMI payments also vary with change in rates.