How To Calculate Amortized Loan Payments?

Hey Pal,

Before understanding how to calculate amortized loan payments, I would like to say that the term "amortisation" refers to paying off debt with regular payments over a predetermined period of time. A thorough table of repeating loan payments known as an amortisation schedule breaks down the principal component and the interest charged in an EMI until the loan is fully repaid. 

The amount of each EMI, or equated monthly instalment, is the same, but the earlier instalments in the schedule have a higher amount of interest and a lower amount of principal, and vice versa. The final line of the schedule lists the total interest and principal payments made by the borrower during the course of the loan.

The lenders' home loan EMI calculators make EMI calculations easier while also providing applicants with a potential home loan repayment schedule. We might state that the EMI calculator tool is used to determine the repayment schedule. After all, figuring out the potential EMI for a given loan amount, loan tenure, and interest rate gives the solution to how to pay it back over time.

As a result, a home loan EMI calculator is an effective and straightforward online tool that simultaneously calculates your EMIs, total house loan payment, and interest payment schedule.

Based on the principal amount, tenure, and interest rate entered, a formula is used to determine the EMI and its repayment schedule:

Where: E = [P x R x (1+R)N]/[(1+R)N-1],

P is the principal loan sum.

T = Total loan tenure in months R = Monthly rate of interest or the percentage rate of interest divided by 12.

E stands for the monthly payment on a mortgage.

But the math doesn't end there. The monthly EMI is easily provided by this formula. However, a loan amortisation plan specifies which portion of the EMI is used for principal payments and which portion is used for interest payments. One can use the following formula to determine this:

Principal payment equals EMI - [Remaining balance of mortgage times monthly interest rate].

Let's use a 50 lakh loan as an example, with a 30-year term, a 6% interest rate, and an EMI of 29,978. We can determine the specifics of the first EMI payment using the aforementioned formula.

Month 1's principal payment is calculated as follows: 29,978 - (5000000 x 6%/12) = 4,978

The interest component for the first month will be 29,978 - 4,978, or 25,000.

In a similar vein, you can use the aforementioned formula to determine the principal payment and interest components of the remaining months. As you can see, this creates a sort of table showing how the principal portion of your EMI will keep rising while the interest portion will keep falling.

Using the same calculation methods, the EMI calculator on NoBroker provides you with a year-by-year breakdown of your amortisation plan.

I would like to conclude here as I believe this suffices your query about how to calculate amortized loan payments. I hope this helps:)

Read More: