Loan Repayment Calculator

Loan Repayment Calculator (Useful)

Loan Repayment Calculator can be used to calculate the repayment amount in the form of installment and what shall be the periodical installment amount in case the person borrows a loan from a financial institution. 

Loan Repayment Calculator

[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 loan Amount
$
Rate of Interest per annum
%
Number of period or frequency wherein loan amount is to be paid

About Loan Repayment Calculator

The formula for calculating Mortgage is per below:

[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

The Loan Repayment Calculator can be used to calculate the monthly installment amount in case the repayment of the loan is to be paid monthly, or even quarterly or annually, depending upon what is the repayment schedule decided upon. This formula is almost equivalent to calculate the annuity as well. Also, one needs to adjust the term ‘R’ and ‘N’ in the above formula, i.e., if repayment is made monthly, then ‘R’ needs to divide by 12, and ‘N’ needs to be multiplied by 12.

This formula can be used to derive only the standard fixed payment upon which the loan is taken. This calculator can be used to calculate repayments for any type of loan, whether it is an auto loan, mortgage loan, consumer loan, or business loans.

How to Calculate using the Loan Repayment Calculator?

One needs to follow the below steps to calculate the monthly installment amounts.

Step#1: First of all, determine the loan amount which is borrowed. Banks usually provide more loans to those who have a good credit score and less amount to those who have a lower credit score. First, we shall enter the principal amount.

P

Step#2: Multiply the principal by the rate of interest.

PxR

Step#3: Now, we need to compound the same by rate until the loan period.

PxRx(1+R)^N

Step#4: We now need to discount the above result obtained in step 3 by the following:

N-1

Step#5: After entering the above formula in excel, we shall obtain installments periodically.

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

Loan Repayment Examples

Example #1

CC & C Inc. has been running a business in the last 50 years, and it is a well-established firm in the market. The directors have good relations with the bank they deal with, and they have created goodwill. After paying a one-time big dividend to their shareholders in the last quarter, they have now received one of the biggest orders, and to fulfill the same, they lack funds for capex. They approach a bank for a term loan against their capital expenditure, and the machinery will be kept as security.

Banks have agreed on them to provide funds for $200,000 at an 11% rate of interest, and it shall be repaid on a quarterly basis. The loan has been taken for 10 years. Based on the given information, you are required to calculate what shall be the installment amount for the quarterly repayments.

Solution:

We need to calculate the Installment amount; for that first, we shall calculate the loan amount, which is $200,000. The number of periods it is required to be paid in 10 years, but since here, the firm is going to pay on a quarterly basis hence the number of payments that he shall be required to be paid is 10*4, which is 40 equally installments and lastly, the rate of interest is 11% fixed which shall be calculated quarterly which is 11%/4 which is 2.75%.

Loan Repayment Calculator (Example 1 - Data)

Now we shall use the below formula to calculate the EMI amount.

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

Loan Repayment Calculator (Example 1 - Output)

  • = [200,000 * 2.75% * (1 + 2.75%)^40 ] / [ (1 + 2.75%)^40 – 1 ]
  • = $8,306.30

Therefore, the installment amount for the firm for 10 years on the loan amount of $200,000 shall be $8,306.30

Example#2

Mr. Vivek has been in need of funds due to a family emergency, as there has been a medical situation in the family. The doctor quoted $85,800 as the total expenditure. Mr. Vivek didn’t have much savings, and medical insurance is covering to the tune of $20,000, and rest has to be bear by Mr. Vivek.

Hence, Mr. Vivek approaches the bank, and the bank was ready to give him a personal loan, and it will charge a rate of interest 17%, and he agrees for the same, and tenure will be 12 years. Based on the given information, you are required to calculate the monthly installment amount and the excess amount in the form of interest.

Solution:

We need to calculate the EMI amount; for that first, we shall calculate the loan amount, which is $85,800 less $20,000, which is $65,800. The number of periods it is required to be paid is 12 years, but since Mr. Vivek is going to pay monthly hence the number of payments that he shall be required to be paid is 12*12, which is 144 equally installments, and lastly, the rate of interest is 17.00% fixed which shall be calculated monthly which is 17%/12 which is 1.42%.

Loan Repayment Calculator (Example 2)

Now we shall use the below formula to calculate the EMI amount.

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

Loan Repayment Calculator (Example 2 - EMI)

  • = [65,800 * 1.42% * (1 + 1.42%)^144 ] / [ (1 + 1.42%)^144 – 1 ]
  • = $1,073.81

Hence, the monthly installment amount for Mr. Vivek for his personal loan would be $1,073.81

Total Interest Outgo

Loan Repayment Calculator (Example 2 - Interest Outgo)

  • = ($1,073.81 * 144) – $65,800
  • = $88,827.96

Total interest outgo equals to $88,827.96

Conclusion

This is a broader version of the loan calculator as this can be used to calculate the installment amount on any type of loan, whether it’s a business loan or mortgage loan or student loan or personal loan, or auto loan. As stated, this is a fixed interest loan calculator and cannot be useful when the interest changes in between the lifetime of the loan tenure.

Recommended Articles

This has been a guide to the Loan Repayment Calculator. Here we provide you the calculator that is used to calculate the loan repayment amount in the form of installment along with examples. You may also take a look at the following useful articles –