Loan Repayment Calculator

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21 Aug, 2024

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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. It takes into account the amount, interest rate, and tenure to give out the final numbers through a home loan repayment calculator or any other such calculator.

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

Loan Repayment Calculator (Useful)

Loan Repayment Calculator Explained

A loan repayment calculator is a valuable financial tool designed to assist individuals and businesses in estimating the monthly payments and overall cost of a loan over its lifespan. Typically, it is available online or through financial institutions, these calculators provide users with a convenient means to analyze and plan their loan obligations.

The education loan repayment calculator or any other loan calculator functions based on the input of key variables, including the loan amount, interest rate, and loan term. Users can input this information to obtain an accurate breakdown of monthly payments and the total amount repaid over the loan's duration.

One of the primary features of a loan repayment calculator is its ability to present a detailed breakdown of monthly payments. This includes the portion allocated to principal repayment and the interest accrued. Such transparency allows borrowers to understand the distribution of their payments and make informed financial decisions.

Loan calculators often generate an amortization schedule, illustrating the loan's repayment timeline. This schedule outlines each payment's composition, showcasing the gradual reduction of interest payments and the increasing contribution to the loan's principal over time.

Beyond facilitating current loan assessment, the calculator serves as a strategic financial planning tool. Users can experiment with different scenarios, adjusting variables to observe how changes in interest rates or loan terms impact their repayment obligations.

Therefore, a loan repayment calculator empowers borrowers with insights into the financial implications of their loans, fostering informed decision-making and enhancing financial literacy. Whether for mortgages, personal loans, or business financing, this tool provides clarity and aids in effective financial management.

Formula

The formula for calculating home loan repayment calculator is as discussed below:

Wherein,

P is the loan amount
R is the rate of interest per annum
N is the number of periods 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 the repayment schedule. This formula is almost equivalent to calculating the annuity as well. Also, one needs to adjust the terms ‘R’ and ‘N’ in the above formula, i.e., if repayment is made monthly, then ‘R’ needs to be divided 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 calculate repayments for any loan, whether an auto, mortgage, consumer loan, or business loans.

How to Calculate?

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

First of all, determine the loan amount which is borrowed. Banks usually provide more loans to those with a good credit score and fewer amounts to those with a lower credit score. First, we shall enter the principal amount.
Multiply the principal by the rate of interest.
We need to compound the same by rate until the loan period.
We now need to discount the above result obtained in step 3 by the following:
After entering the above formula in excel, we shall obtain installments periodically.

Schedule

An education loan repayment calculator or any loan’s schedule serves as a comprehensive guide, providing borrowers with a clear roadmap of their repayment journey and facilitating better financial planning.

Principal and Interest Breakdown: Clearly delineates each monthly payment into the principal amount and the interest accrued, providing a transparent understanding of how payments contribute to loan reduction.
Amortization Details: Outlines the loan's amortization schedule, illustrating the distribution of payments over the loan term. This schedule visualizes the decreasing interest and increasing principal components as the loan progresses.
Monthly Payment Amount: Specifies the fixed monthly payment amount, allowing borrowers to plan and budget effectively.
Total Interest Paid: Displays the cumulative interest paid over the loan's duration, enabling borrowers to comprehend the full cost of borrowing.
Remaining Loan Balance: Highlights the remaining loan balance after each payment, aiding borrowers in tracking their progress toward full repayment.

Examples

Now that we understand the basics, formula, and the schedule of this concept, let us also understand the practical application of the concept through the examples below.

Example #1

CC & C Inc. has been running a business for the last 50 years and is a well-established market firm. The directors have good relations with the bank they deal with and 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 quarterly. The loan has been taken for ten 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 is ten years, but since the firm will pay quarterly, the number of payments that he shall be required to be paid is 10*4, which is 40 equal installments. Lastly, the interest rate is 11% fixed, which shall be calculated quarterly, 11%/4, which is 2.75%.

Sr No	Particulars	Amount
1	Property Value	$200,000.00
2	Loan%	100%
3	Loan Amount Approved	$200,000.00
4	Number of Years	10
5	Rate of Interest per annum	11.00%
6	Frequency of Payment	4.00
7	Quarterly Rate	2.75%
8	Total Number of Payments	40

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

Quarterly Installment = /

Loan Repayment Calculator (Example 1 - Output)

= /
= $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 needed 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 was covered to the tune of $20,000, and the rest had to be borne by Mr. Vivek.

Hence, Mr. Vivek approached the bank, and the bank was ready to give him a personal loan, which would charge a rate of interest of 17%; he agreed to the same, and his 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 equal installments; lastly, the rate of interest is 17.00% fixed which shall be calculated monthly which is 17%/12 which is 1.42%.

Sr No	Particulars	Amount
1	Medical Expenditure	$85,800.00
2	Insurance	$20,000.00
3	Loan Amount Approved	$65,800.00
4	Number of Years	12
5	Rate of Interest per annum	17.00%
6	Frequency of Payment	12.00
7	Monthly Rate	1.42%
8	Total Number of Payments	144

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

EMI = /

Loan Repayment Calculator (Example 2 - EMI)

= /
= $1,073.81

Hence, the monthly installment amount for Mr. Vivek for his 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 $88,827.96