If you have a personal loan and wish to gain full control over it then we have a perfect solution for you. But first let’s explain few terms.
What does “EMI” stand for?
EMI means Equated Monthly Installment. Basically, most loans are paid off by the exact same amount every payment period (weekly, fortnightly or monthly).
Ways to Set Your Repayment Amounts (EMI)
There are in fact two ways how the Equated Monthly Installments are set:
1. Calculating EMI based on Loan Amount, Loan Term and Interest Rate
This is the most usual way of doing it. Your Bank will calculate it based on your Loan Amount, Loan Term and Interest rate.
The last payment will usually exactly match your outstanding balance and accrued interest, bringing the balance to zero.
2. Setting your own EMI
Then there is another approach. You can specify what EMI Value you want based on how much you can afford to pay.
If you choose lower amount the Loan Term will be extended. If you increase it then the Loan Term will shorten.
With this approach your payment amount will be the same for all but one period – the last one. The payment amount is composed of Principal and Interest and their proportion changes with each repayment.
The first method sets the amount to be the same for all periods. With the second method it’s you who sets the payment amount, so obviously it won’t be fine-tuned.
But this is not a problem. Solution here is that your last payment is lower and will cover the remaining loan balance plus any interest accrued.
Types of Available Calculators
On the internet you can find many calculators that offer you first way of calculating EMI. We have developed an Excel Calculator which works the other way around.
You specify Loan Start Date, Loan Amount, Interest Rate, Repayment Frequency and Repayment Amount (or EMI). The calculator will then calculate the Total Length of time (Loan Term) it will take to repay the Loan.
To download the Free version (up to 30 repayments): click here or on the Excel icon
To find out more about Premium version: click here
With this calculator you can choose whatever amount you can afford. There is only one limit: the EMI must be at least slightly higher than the Interest.
If it was lower, you would never be able to repay the loan because your uncovered interest would keep increasing your Loan Balance.
Now you may ask: But I don’t know what the Interest is?
Simply type whatever Repayment (EMI) Amount. If it’s lower than Interest, the calculator will start showing you negative Principal Amounts. Then simply check what is the Interest and match the Repayment to be at least slightly higher. This will be your minimum EMI.
Advantages of our EMI Loan Calculator
Our calculator has some more advantages. To name just few:
- Use it for any type of Loan (personal, car, home, mortgage or credit card)
- Chose any Repayment Frequency (daily, weekly, fortnightly or monthly)
- Specify Compounding Frequency (we will talk about this in a separate article)
- Set any Interest Rate
- Generate detailed Amortization Schedule
- Add any number of Extra Repayments
- Change Payment Dates (in case you miss or are late with your repayments)
- Change Repayment Amount (EMI) for any period in case you underpay or overpay
Once you enter all details, the calculator will give you detailed Amortization Schedule. With this you know exactly how much you owe at any point in time (Loan Balance) and what is the portion of your Interest and Principal.
Also, in the top right part of the screen it will show your Final Payment Date and the number of years (Loan Term) it will take to repay your Loan.
You will also know the Total Interest paid over the whole loan term.
Main Benefit of our Calculator
The main benefit you get from this calculator is the possibility to choose your own Repayment Amount (EMI) which you can easily afford.
So instead the bank telling you how much you pay, it’s you who makes that decision.
One Thing You Should Be Aware Of
Please remember one thing: The lower you set your Repayment Amount (EMI), the longer it will take to repay the loan and also the more Total Interest you will pay. So instead of trying to set it at the minimum level, try to set it on a level you can afford.
The fastest you repay the Loan, the less costly it will be. Please keep this in mind!
For more information about this calculator click here.