Loan Calculator 

Formula / Working Explanation:

The basic formula for calculating monthly loan payments (EMI) is:

EMI = \frac{P \times r \times (1 + r)^n}{(1 + r)^n – 1}

Where:

• P = Loan Amount (Principal)

   

• r = Monthly Interest Rate (APR ÷ 12 ÷ 100)

   

• n = Number of Payments (Loan Term in months)

   

This formula applies to amortized loans, ensuring each installment includes both principal and interest.

Example Calculation:

If you borrow $10,000 at an interest rate of 6% APR for a 5-year loan term (60 months):

• Loan Amount (P) = $10,000

   

• Monthly Interest Rate (r) = 0.06 ÷ 12 = 0.005

   

• Number of Payments (n) = 60

   

EMI = \frac{10000 \times 0.005 \times (1.005)^{60}}{(1.005)^{60} – 1} \approx 193.33

👉 Your monthly payment will be $193.33, with a total loan cost of $11,599.80.

FAQs:

Q1. What is an amortized loan?
An amortized loan is a loan where payments are spread out over time, covering both principal and interest. Mortgages, auto loans, and student loans are common examples.

Q2. What’s the difference between secured and unsecured loans?
A secured loan requires collateral (like a house or car), while an unsecured loan depends on your creditworthiness, income, and sometimes a co-signer requirement.

Q3. How does APR differ from APY?
APR (Annual Percentage Rate) shows yearly interest including fees, while APY (Annual Percentage Yield) reflects how compound frequency impacts total interest paid.

Q4. What happens if I default on a loan?
Defaulting means missing payments. This can damage your credit score, lead to collection agencies, and in the case of secured loans, loss of collateral.

Conclusion:

Managing loans doesn’t have to be complicated. Use our Loan Calculator to compare different loan types, check repayment schedules, and plan your finances wisely. Start calculating today to make smarter borrowing decisions!