Business loan interest is calculated on the basis of an amortization schedule, wherein the amount of interest you pay keeps on decreasing. The interest amount will be higher during the initial months of loan repayment and will gradually decrease during the latter half of the tenure.
Consider the following example – For a principal loan amount of Rs. 10,00,000 with an interest rate of 20% for a period of 2 years, calculate the monthly EMI by using the formula A = [r x P x (1+r)n]/(1+r)n-1], where E is the EMI, P is the principal loan amount, r is the rate of interest, and n is the tenure in months or use a quick and accurate online tool such as the business loan EMI calculator. For the given example, the monthly EMI = Rs. 50,896.
Months
|
Starting Balance
|
Interest Paid
|
Principal Paid
|
Ending Balance
|
May 2020
|
10,00,000
|
16,667
|
34,229
|
9,65,771
|
June 2020
|
9,65,771
|
16,096
|
34,800
|
9,30,971
|
July 2020
|
9,30,971
|
15,516
|
35,380
|
8,95,592
|
August 2020
|
8,95,592
|
14,927
|
35,969
|
8,59,622
|
September 2020
|
8,59,622
|
14,327
|
36,569
|
8,23,054
|
October 2020
|
8,23,054
|
13,718
|
37,178
|
7,85,875
|