Personal Loan EMI Calculation

Personal Loan EMI Calculation Formula & Function in MS Excel

May 26, 2023 • 25192 views

When it comes to managing personal finances, understanding how to calculate the Equated Monthly Installment (EMI) for a Personal Loan is essential. Excel, being a powerful tool, can simplify the calculation process. This blog will help you use the Personal Loan EMI calculator Excel by teaching the basic mathematical formulas of Excel.

Why Use an Excel EMI Calculator?

Excel is one of the simplest tools to calculate your EMIs. You can easily input the details of your loan for accurate calculation of your EMIs. Borrowers often prefer to use Excel as it is easy to use, provides accurate results, and saves time. All you need to do is accurately enter the formula to calculate EMI in Excel.

Step-by-Step Guide to Calculating Your Loan EMIs in Excel

Calculating EMIs for a Personal Loan in MS Excel is simple, fast, and accurate. You will get accurate results with the utilisation of an appropriate Excel formula. The below points will explain how to calculate Home Loan EMI in Excel:

  • Step 1: Launch MS Excel on your computer to start the Personal Loan EMI calculation.
  • Step 2: Create a new worksheet or open an existing one where you want to calculate the EMI.
  • Step 3: Assign labels to the columns, such as Loan Amount, Interest Rate, Loan Tenure, EMI, and Total Interest
  • Step 4: In the designated cells, enter the loan amount, interest rate, and loan tenure.
  • Step 5: Ensure the interest rate and loan tenure are in the correct format (annual interest rate divided by 12 for monthly calculations).
  • Step 6: To calculate the EMI, use the following formula in the EMI cell: =PMT (rate, nper, pv)
  • Step 7: Replace 'rate' with the cell reference for the monthly interest rate, 'nper' with the cell reference for the loan tenure in months, and 'pv' with the cell reference for the loan amount.

Understanding the Benefits of Using Excel for Loan EMIs

There are numerous advantages of EMI calculation in Excel. These benefits include:

  • Time-Saving: Using Excel helps you to automate the complicated process of calculating your EMIs. This significantly reduces the time needed, as Excel formulas eliminate the need for manual calculations.  
  • Reduces Effort: Templates can be created in Excel for calculating your loan EMIs. These templates can be reused easily for calculating monthly instalments for different loan amounts, interest rates and tenure. This enhances your efficiency and enables you to calculate different loan EMIs easily.
  • Accuracy: In-built mathematical formula for EMI calculation eliminates the chances of getting inaccurate results. This helps you prevent mistakes that could impact your repayment schedules and hamper your financial planning. Excel empowers you to be precise with finances.

Common Mistakes to Avoid When Calculating EMI

Following are some of the biggest mistakes that you must avoid while calculating EMIs:

  • Incorrect Loan Amount

Entering the wrong loan amount is a common mistake that people often make. Some people put in a higher loan amount than they actually want to borrow, which increases their EMI. On the other hand, some people enter a lower loan amount which creates a misleading idea about your EMI. Overall, errors while entering the amount can have a significant impact on your monthly installments.

  • Overlooking the Tenure

A short tenure will reduce the interest amount. However, it will increase your overall EMI significantly making it challenging to pay the monthly installments on time. Increased EMIs can significantly impact your financial management. It will help borrowers customise their loan in a way that ensures easy credit repayment.

  • Not Checking Interest Rate

Before taking a loan of any kind, you must check its interest rate. Neglecting this factor might create a situation where EMIs hugely differentiate from your anticipated amount. Thus, you should check the interest rate before choosing your EMI plan.

Points to Keep in Mind While Calculating EMI

Whether you are planning to borrow a Personal Loan for home renovation, wedding, or some other personal expenses. It is crucial to accurately calculate the EMI to ensure you can manage the monthly payments. Here are some key points to keep in mind while calculating EMI to ensure accuracy and informed financial planning.

  • Consider the Interest Rate

The interest rate directly affects the EMI amount. Even a slight difference in the interest rate can significantly impact your monthly payments. Make sure to use the correct interest rate when calculating the EMI. If the interest rate is provided on an annual basis, convert it to a monthly rate by dividing it by 12.

  • Account for the Loan Tenure

The loan tenure, or the duration over which the loan will be repaid, is a crucial factor in EMI calculations. A longer tenure results in a lower EMI but may lead to higher interest payments over time. Conversely, a shorter tenure increases the EMI but reduces the overall interest burden. Make sure you consider your financial capabilities and select a loan tenure that suits your repayment capacity the best.

  • Include Additional Charges

While calculating the EMI, it is essential to account for any additional charges associated with the loan. These charges may include processing fees, administrative fees, or prepayment penalties. These costs affect the overall loan amount and, consequently, the EMI calculation. Consult the loan agreement or contact the lender to ensure all relevant charges are included for an accurate EMI estimation.

  • Be Mindful of Prepayment Provisions

Some loans offer the option of prepayment or early repayment. If you plan to make prepayments in the future, consider the prepayment provisions of the loan. Check if there are any penalties or charges associated with prepayment and understand how it affects the EMI calculation. Evaluating prepayment options can help you determine the flexibility and cost-effectiveness of repaying the loan before the designated tenure.

  • Use an EMI Calculator

To simplify the EMI calculation process, it is recommended to utilize online EMI calculators or mobile applications specifically designed for this purpose. These tools provide accurate results and save you time and effort. Input the loan amount, interest rate, and tenure into the calculator to obtain the EMI amount instantly. Remember to use reliable and trustworthy calculators to ensure accurate calculations.

  • Review and Validate the Calculation

After performing the EMI calculation, review the results to ensure accuracy. Double-check the loan amount, interest rate, tenure, and additional charges included in the calculation. It is always advisable to validate the EMI amount with a financial advisor or the lender to ensure accuracy and clarity.

ALSO READ :- Top 5 Benefits of Using a Personal Loan EMI Calculator…!

How to Calculate EMI through Excel?

The EMI calculation formula in Excel, PMT (rate, nper, pv), uses three key variables:

  • Rate: The monthly interest rate for the loan, calculated by dividing the annual interest rate by 12.
  • Nper: The total number of monthly installments or the loan tenure in months.
  • Pv: The present value or the loan amount.

Excel's PMT function combines these variables to provide the EMI amount. By referencing the respective cells containing the loan details, you can perform EMI calculations accurately.

To Conclude

Understanding how to use a Personal Loan EMI calculator Excel is crucial for instant and accurate monthly installment calculation. Excel can notably simplify the EMI calculation process. By considering factors like interest rate, loan tenure, and additional charges, and using Excel's PMT function, borrowers can accurately calculate their EMIs. It is recommended to validate the calculations and utilize reliable online EMI calculators for convenience and accuracy. 
Apply for any loan with Poonawalla Fincorp and repay it in convenient EMIs.

Frequently Asked Questions About EMI Calculation

1. How to calculate the Personal Loan EMI formula?
The formula to calculate the Personal Loan EMI is as follows: EMI = [P x R x (1+R)^N]/[(1+R)^N-1], where P represents the principal loan amount, R denotes the monthly interest rate, and N signifies the number of monthly installments or the loan tenure in months.
2. How to calculate step-up EMI Formula in Excel?
To calculate step-up EMI in Excel, you can use the PMT function. The formula is: =PMT (rate, number_of_periods, present_value, [future_value], [type]). Simply enter the appropriate values for rate, number_of_periods, present_value, and future_value (if applicable) to calculate the step-up EMI.
3. Which formula is used to find EMI?
The formula used to find EMI is: EMI = [P x R x (1+R) ^ N] / [(1+R) ^N-1], where P represents the principal loan amount, R denotes the monthly interest rate, and N signifies the number of monthly installments or the loan tenure in months.
4. How is EMI step-down calculated?
EMI step-down is calculated by decreasing the EMI amount over time. This can be achieved by making additional payments towards the principal loan amount, thereby reducing the outstanding balance. As the outstanding balance decreases, the interest portion of the EMI also decreases, resulting in a lower EMI amount.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Personal Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply

poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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