Calculate the yearly interest rates applied to a loan

What are the basic loan related terms I need to know?

Duration: The duration of a loan is the length of time for which a loan is held. The duration can be calculated mathematically for a given interest rate, amount and EMI.

EMI: An EMI, or equated monthly instalment, refers to a constant monthly payment made to a lender. This term is used when a loan is paid back in instalments over a period of time.

Principal amount: The EMI consists of two parts - the interest and principal amount. The principal amount is the amount of an EMI in a given period that goes towards repaying the principal of a loan in the period. Over time, the principal amount of the EMI increases, while the principal amount decreases.

Interest amount: The interest amount is the amount of an EMI in a given period that goes towards repaying the interest due on a loan in the period. Over time, the interest amount of the EMI decreases, while the principal amount increases.

Interest rate: Interest is the amount of extra money you have to pay back on top of the amount you borrowed. It's like a fee for borrowing money. The interest rate is usually expressed as a percentage of the original amount borrowed, and it determines how much you'll have to repay over time.

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What are the formulas I need to know?

The formula to compute the applicable yearly interest rate on a loan is given above. By providing relevant inputs: principal amount (P), loan EMI, and loan duration (n), we can solve the equation to calculate the interest rate that applies to a loan. This formula can be used to compute the interest rate for home loans, mortgages, car loans, personal loans etc.

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What is the applied interest rate on a loan of ₹50,00,000 if the EMI is ₹40,000 and the duration is 360 months?

If ₹50,00,000 is borrowed for a period of 360 months or 20 years with an EMI of ₹40,000, then it would correspond to yearly interest rate of 8.9357%. To compute the principal and interest amounts across the loan repayment duration, use this calculator.

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What is the applied interest rate on a loan of ₹30,00,000 if the EMI is ₹32,000 and the duration is 240 months?

If ₹30,00,000 is borrowed for a period of 240 months or 20 years with an EMI of ₹32,000, then it would correspond to yearly interest rate of 11.5034%. 

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What does this loan interest rate calculator do?

Every type of loan, e.g. home loan, car loan, education loan, personal loan, medical loan etc, needs to be repaid. Usually, the repayment takes place in equated monthly instalments or EMIs. The applied interest rate is usually also mentioned in an advertisement or in the documents of a loan, but should it be missing, then this calculator helps calculate the interest rate applied on a loan for a given principal amount, duration, and EMI.

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Why is this loan interest rate calculator useful?

This loan interest rate calculator is useful as it can help a person calculate the applicable yearly interest rate on a loan based off three compulsory inputs: the loan principal, the EMIs, and loan duration. This understanding can help in understanding the impact of different types of loans and possibly in making better loan decisions.

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How do I use this loan interest rate calculator?

Instructions to use this loan interest rate calculator are provided above.