1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to repay a loan over a specified term, including interest. It's commonly used for home loans, car loans, and personal loans in India.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( P \) — Principal loan amount (INR)
• \( r \) — Monthly interest rate (annual rate divided by 12)
• \( n \) — Total number of payments (loan term in years × 12)
• \( PMT \) — Monthly payment amount (INR)

Explanation: The formula accounts for compound interest over the loan term, calculating a fixed payment that covers both principal and interest each month.

3. Importance of Loan Calculation

Details: Accurate loan payment calculation helps borrowers understand their financial commitment, compare loan offers, and plan their budgets effectively.

4. Using the Calculator

Tips: Enter principal amount in INR, annual interest rate in percentage, and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include GST or other fees?
A: No, this calculates only the principal and interest components. Additional charges like processing fees or GST are not included.

Q2: How is the monthly interest rate calculated?
A: The annual rate is divided by 12 (months) and converted to decimal (e.g., 12% becomes 0.01 monthly).

Q3: What's the difference between reducing balance and flat rate?
A: This calculator uses reducing balance method where interest is calculated on outstanding principal. Flat rate calculates interest on original principal throughout.

Q4: Can I use this for prepayment calculations?
A: No, this calculates standard EMIs. Prepayment would require a different calculation for reduced interest.

Q5: Are there any rounding differences compared to banks?
A: Banks may use slightly different rounding methods, so actual EMI might differ by a few rupees.