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EMI Calculator

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What is the meaning of loan?

An act of giving the money or property or some other material goods to someone is known as loan. And this is done in exchange of the future repayment of principal amount & for most times this is inclusive of the interest apart from the other finance charges.

What is the meaning of loan term?

Loan term is also known as a term loan which in turn happens to be the monetary loan. This monetary loan is paid in the form of regular payments over a period of time.

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What is meant by rate of interest?

Whenever someone applies for a loan, now it can be either home loan or car loan or a 2 – wheeler loan or for that matter any other loan, then they will have to be aware of the fact that an interest rate would be charged on the amount being lent. In addition to this, the said interest rate or the rate of interest is the percentage of the principal amount which the lender states even before the money is lent to the borrower. Another aspect regarding the interest which has to be kept in mind is that, these interest rates are essentially noted to be based annually. Apart from this, another name for these interest rates is APR or the annual percentage rate.

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What is a loan calculator?

As stated earlier, loan happens to be a contract which is between a lender & a borrower. Here the borrower receives a said amount of money & this amount is also known as the principal. A borrower on the other hand, is a person who has to in – turn return the money in the stipulated time. And if you are looking for some ways to calculate the loan amount then it would be an added advantage if you know as to how much money is to be returned on monthly basis. For this, a loan calculator will come handy.

How to use a loan calculator?

As stated earlier, loan calculator is put in to use when any one wishes to calculate the loans such as student (education) loan or the auto loans or for that matter the mortgages. In order to understand the steps to calculate the loan, you can keep reading as we have very clearly stated the calculation part.

Firstly, one has to enter the loan amount in the field marked for it. While in the next box, the loan term is to be mentioned. One should also remember the fact that the interest rate would keep fluctuating & a lot depends on the financial institutions. Hence, in the 3rd field, you must enter the rate of interest. In addition to this, there are some banks or the other finance institutions which have the option of the pay back & this is not necessarily monthly but it can also be fortnight or weekly or quarterly & the likes. Thus, you can select the pay back option & finally click on calculate.

Formulae related to loan calculator

  1. Loan Payment formula

\(P\quad =\quad \frac {r\quad (PV)}{1- (1+r)^{-n}}\)

In the above equation, one can see that the terms used in the equation mean the below listed things – P is for the payment on one hand whereas on the other hand, the present value is represented by PV. Besides this, the rate per period is denoted by r while the duration or the number of periods are represented by the value n.

  1. 2nd Loan payment formula

One will be surprised to know but there is yet another formula to calculate the loan payment & it has been given here as well –

\(P\quad =\quad \frac { P\quad V}{P\quad V\quad I\quad F\quad A}\)

In the above equation, one will get to know that P stands for the payment or the loan amount. Furthermore, PV is the present value. Finally, the variables are replaced by PVIFA in the formula mentioned above.

  1. Balloon balance of the loan

\(F \quad V \quad = \quad (\quad 1 \quad + \quad r\quad )^{n}\quad -\quad P\quad [\frac{(\quad 1 \quad + \quad r\quad )^{n}\quad – \quad 1]}{r}]\)

According to the above stated equation, FV means the balloon balance or the future value whereas the present value or the original balance means PV. The payment is represented by P, rate per payment means r & n is the number of payments.

  1. Remaining balance on loan

\(F \quad V \quad = \quad (\quad 1 \quad + \quad r\quad )^{n}\quad -\quad P\quad [\frac{(\quad 1 \quad + \quad r\quad )^{n}\quad – \quad 1]}{r}]\)

\(PV(1+r)^{n}\) is FV of the Original Balance;

\(P\frac {(1+r)^n-1}{r}]\) is FV of annuity

  1. Annuity payment PV

\(P\quad =\quad \frac {r\quad (PV)}{1- (1+r)^{-n}}\)

Here, P means payment, PV = present value, r = rate per period & n = number of periods.