Personal Loan Amortization Calculator India Ay

Loan Amortization Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Principal Amount (P):

INR

Annual Interest Rate:

Loan Term:

years

Year to Display:

year

Monthly Payment (PMT):

Principal Paid in Year :

Interest Paid in Year :

Remaining Balance after Year :

Unit Converter ▲

Unit Converter ▼

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1. What is Loan Amortization?

Loan amortization is the process of spreading out a loan into a series of fixed payments over time. Each payment goes toward both principal and interest, with the interest portion decreasing over time while the principal portion increases.

2. How Does the Calculator Work?

The calculator uses the amortization formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

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

Explanation: The formula calculates the fixed monthly payment required to fully pay off the loan over its term, including both principal and interest components.

3. Importance of Amortization Calculation

Details: Understanding loan amortization helps borrowers see how much of each payment goes toward principal vs interest, plan prepayments, and understand the true cost of borrowing.

4. Using the Calculator

Tips: Enter principal amount in INR, annual interest rate in percentage, loan term in years, and the specific year you want to analyze. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does prepayment affect amortization?
A: Prepayments reduce the principal faster, decreasing total interest paid and potentially shortening the loan term.

Q2: Are there different amortization methods?
A: Most personal loans use fixed-rate amortization as shown here. Some loans may have variable rates or interest-only periods.

Q3: How does loan tenure affect payments?
A: Longer tenures reduce monthly payments but increase total interest paid. Shorter tenures have higher payments but lower total interest.

Q4: What is the impact of interest rate changes?
A: Higher rates increase both monthly payments and total interest. Even small rate differences can significantly impact total loan cost.

Q5: Are there tax benefits on personal loan interest?
A: In India, personal loan interest is generally not tax-deductible unless the loan is for business or home renovation purposes.