# Loan Calculator (Personal and Educational) Article byHarsh Katara ## Loan Calculator

This Simple Loan Calculator is useful for calculating periodical installment, whether it be monthly, quarterly, semi-annually, or annually installments.

[P*R*(1+R)^N]/[(1+R)^N-1]

Wherein,
• P is the loan amount
• R is the rate of interest per annum
• N is the number of period or frequency wherein loan amount is to be paid
\$
%

The formula for calculating the loan amount is –

[P*R*(1+R)^N]/[(1+R)^N-1]

Wherein,

• P is the loan amount
• R is the rate of interest per annum
• N is the number of period or frequency wherein the loan amount is to be paid

This considers the initial amount, which is the principal amount or the loan amount, compounds the rate of interest depending upon the frequency of repayment. This calculator shall allow comparing loans across maturities, and the user would be able to calculate what extra loan amount will be the outgo in the form of interest. This simple calculator is useful for computing installments for any product, whether it be personal loans or educational loans.

### How to Calculate the Loan Calculator?

One needs to follow the below steps in order to calculate the periodical installments of the loan.

1. Calculate the down payment, if any, and deduct the same from the total value of the thing for which the loan is taken, which shall provide the loan amount or, in other words, is the principal amount: 2. Multiply the principal by the rate of interest applicable to the loan product. 3. Now, we need to the same by rate until the loan period. 4. We now need to discount the above result obtained in step 3 by the following: 5. After entering the above formula in excel, we shall obtain installments periodically for the loan in question.

### Loan Calculator Examples

You can download this Loan Calculator Excel Template here – Loan Calculator Excel Template

#### Example #1

Mr. Vince has the desire to purchase a Hyundai luxury car that shall cost him around \$35,000. He enquired in the showroom, and luckily, the showroom had tied with a bank that provides instant loans for creditworthy customers. On inquiry with the banker, he was told that as per credit score, he is eligible for a 90% loan, and the rest has to be paid upfront in the form of down payment. He agrees to the same, and further, he was told that the rate of interest applicable would be 11%, and the maximum tenure he can avail for is 5 years and has to be repaid on a monthly basis.

You are required to Calculate the installment amount on the loan that Mr. Vince is required to pay.

Solution:

We need to calculate the EMI amount; the number of installments is 5 years, but since it is monthly outgo hence the number of payments required to be paid is 12*5, which is 60 equally monthly installments and lastly, the rate of interest is 11.00% fixed which shall be calculated monthly which is 11.00%/12 which is 0.92%.

• Upfront Down-payment Calculation:

Loan Amount*(1 – loan percentage)

• The loan amount will be

Now we shall use the below formula to Calculate the Loan amount.

EMI = [P*R*(1+R)^N]/[(1+R)^N-1]

Therefore, the EMI amount for this vehicle loan will be 648.89 for 5 years with monthly repayment.

#### Example #2

VJ has been excellent in his studies, and he belongs to a middle-class family. He desires to study in a college where the fees are around \$21,500 for 2 years. His father approaches the bank where the branch managers ask him to avail of an educational loan, or he can take a personal loan. If he opts for a personal loan, then he would be getting a loan amount of \$18,000 with a rate of interest of 13%, and if he opts for an educational loan, then he can avail it fully at a rate of interest of 12.00%. He intends to avail of a loan for 7 years. You are required to advise VJ as to which loan should be preferred?

Solution:

We need to calculate the EMI amount for both the products. The number of installments is 7 years, but since it is monthly outgo hence the number of payments required to be paid is 12*7, which is 84 equally installments and lastly, the rate of interest is 13% and 12% fixed for personal and educational loan respectively which shall be calculated monthly which is 13%/12 which is 1.08% and 12%/12 which is 1%.

• Upfront Payment Calculation for Personal Loan:

Fees – Loan Amount

Now we shall use the below formula to Calculate the Loan amount.

EMI = [P*R*(1+R)^N]/[(1+R)^N-1]
• Personal Loan:
• Educational Loan:
• Total outgo in personal loan is 327.46 x 84 which is 27,506.25 – 18,000 which is 9,506.25
• Total outgo in educational loan is 379.46 x 84 which is 31,880.84  – 21,500 which is 10,380.84

Hence, he can consider personal loan as outgo is less compare to educational loan.

### Conclusion

This simple calculator, as discussed, can be used to compare loans across products and take decisions based on where the amount outgo is less. This calculator is a broader version and can be used to calculate any loan amount for any type of loan, whether mortgage loan, personal loan or vehicle loan, etc.

### Recommended Articles

This has been a Guide to Loan Calculator. Here we provide the Simple loan calculator that is used to calculate repayment installment periodically for e.g., housing loan, personal loan, vehicle loan or educational loan –