Loan EMI Calculation in Excel – Understanding the Methods and Formula with Example
Ideally, you should calculate your loan EMI in advance to understand your monthly repayment obligations. You can do so either with the help of a loan EMI calculator or using the EMI formula in excel. Though loan EMI calculations in excel could be a bit time-consuming, there’s no harm in learning the loan EMI formula.
This blog helps you understand how EMI is calculated in excel, its formula and factors that could affect your loan EMI. Let’s dive in.
What is the EMI Formula in Excel?
An EMI calculator excel sheet applies the following formula.
=PMT(RATE,NPER,PV,FV,TYPE)
All you have to do is choose a cell and enter the formula to calculate EMI in excel.
In this formula,
- R stands for the Rate of Interest. Make sure you enter the monthly rate of interest when using the loan EMI calculator excel. The rate of interest provided by the bank or financial institution is usually for the whole year. Divide this value by 12 and then enter.
- NPER is the tenure of the loan or the number of instalments
- PV is the current principal amount payable.
- FV is the future value or the balance after making the previous payment.
- Type is a numerical value. It can be 0 or 1. In case your payment is due at the beginning of the month, set the type as 1. If it is due at the end of the month, set the type as 0.
How to Calculate EMI in Excel?
Financial institutions use a simple EMI calculation formula to estimate the monthly payments to make towards a loan.
The formula is
EMI = (P X R/12) X [(1+R/12) ^N] / [(1+R/12) ^N-1]
In this EMI calculation formula,
P is the principal amount or the actual loan amount.
R is the rate of interest on the loan that you have applied for
N is the loan repayment tenure.
Example of Calculating EMI in Excel
Suppose you have borrowed a loan amount of Rs.1 lakh for 12 months at a 10% p.a.. After applying the formula mentioned above, the EMI payable each month would be Rs.8,792.
However, calculating the EMI manually is a challenging task. You can request your loan provider to provide you with a detailed amortization chart or schedule. It includes important information like EMI payable, interest rate, tenure of repayment and the outstanding loan amount.
You will notice that the EMI amount gradually reduces as you make regular payments, and the principal amount also reduces. This information is essential if you plan to foreclose a loan.
You can go for alternative options like using online EMI calculators or applying the EMI calculation formula in excel. The latter comes in handy and lets you keep detailed accounts of your monthly installments.
Calculate Your Personal Loan EMI
Loan Amount
Rate of Interest (P.a)
%
Loan Tenure (Years)
Years
Monthly EMI
0
Total Interest
Total Amount
Factors that Could Affect the EMI Amount
As you can see in the EMI calculator excel sheet, different variables must be considered when calculating the EMI. The EMI may increase or decrease depending on:
1. Loan Amount
This is the principal amount on which you will be paying interest. The higher the loan amount, the higher the EMI.
2. Repayment Tenure
When you use the EMI calculator excel, you have to enter the number of instalments or the tenure. The longer the tenure, the lesser the EMI. However, you will be making a higher payment towards the interest. Therefore, it is highly recommended that you try to repay the loan at the earliest.
3. Interest Rate
The interest rate varies from one person to another. This depends upon several eligibility criteria, including income, credit score, the security provided, and more.
4. Margin Amount
The margin amount or down payment is a part of the loan amount that the borrower must pay. The higher the margin, the lower the principal amount that the EMI is calculated on. Therefore, the total value of the EMI reduces.
Also Read
Why Should You Calculate the EMI?
Calculating the EMI beforehand will help you manage your current obligations and future finances accordingly. Evaluating the EMI estimate helps you to know your loan tenure as well. If you get an overall idea of how much you are required to pay every month, this will help you manage your finances and keep you away from the risk of defaulting. This, in turn, will ensure a good credit score in the long run.
You can easily calculate the EMI amount by using an online EMI calculator tool. Hence, know your EMI estimate beforehand to avoid any further complications.
Final Word
Calculating your loan EMI in excel sheet could be useful, but it’s extremely time-consuming and labour intensive. Also, the chances of calculation errors are more in manual calculations.
This is where an online loan EMI calculator comes into the picture. It would help you save time and maintain accuracy while calculating loan EMIs
Navi offers an instant cash loan of up to ₹20 lakh at attractive interest rates, starting from 9.9%. You can use Navi’s online EMI Calculator to calculate your monthly repayment obligations.
FAQs
Ans. Amortisation is a process of scheduling EMI payments that offers a detailed calculation of how your loan is supposed to be paid over time. You can check how much is paid towards interest and capital payment in this schedule.
Ans. You can avoid complicated calculations and use an EMI calculator to do the work for you within seconds. This is a time-saving and hassle-free tool which gives accurate results.
Ans. No, pre-payment doesn’t reduce the EMI amount. It reduces the loan tenure. The prepaid amount reduces the principal amount outstanding, which in turn reduces the interest payable
Ans. If you miss your EMI payment for 3 consecutive months, most banks will give you a grace period. If you do not clear the EMI amount accumulated by this period, the bank will start charging you a penalty for late payment. This will significantly affect your credit score.
Ans. You can approach your lender to pause EMI payments for a few months if you come across any financial difficulties. Most lenders or banks provide a waiver of 3 to 6 months in EMI payments in such circumstances.
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