Calculate the loan repayment schedule with interest and principal components per period

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.

Prepayment: On this website, if an amount larger than the determined EMI is paid back in a certain period, it is viewed as a prepayment. Note: Not all loans allow paying an amount larger than the EMI and some may even restrict when this can be done, how much can be paid in addition to the EMI etc.

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What are the formulas I need to know?

The formula to compute the EMI of a loan is given above. By providing relevant inputs and solving the same equation for the principal amount (P), interest rate (r) or loan duration (n), we can calculate other values as well.

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How do I understand the terms above in a simple example?

If ₹35,00,000 is borrowed for a period of 30 years at a rate of 8.6%, then the EMI would be ₹27,160.41 for 360 months. The total principal amount to be repaid would be ₹35,00,000 and the total interest amount due on this loan would be ₹62,77,747.61. The principal and interest amounts per month would keep changing across the entire loan repayment period, e.g. in the first month the principal and interest amount would be ₹2,077.07 and ₹25,083.33 respectively; these would change to ₹2,744.13 and ₹24,416.28 respectively. This can be visually represented in the diagram below.

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What does this loan calculator (interest and principal components) do?

There are many various types of loans, e.g. home loan, car loan, education loan, personal loan, medical loan etc. This calculator currently considers a very simple case where money is borrowed for a purpose. 

 

This calculator estimates the loan repayment schedule using three compulsory inputs: loan amount, annual interest rate, and the loan duration. The loan repayment schedule shows the principal amount repaid and the interest amount repaid; the sum of which is equal to the total payment or the equated monthly instalment (EMI). In this calculator, the option to make additional payments is disabled. To view the impact of additional payments, use this calculator.

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What is the impact of changing either duration, or the EMI, or the interest rate on a loan?

Each loan is different, but using the following examples, we can try and understand how a loan works and how changing some parameters can have a significant impact on it.

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Situation I: Impact of duration 

Assume a loan with a principal of ₹35,00,000 and an interest rate of 8%.

1. Duration 240 months:

   • EMI: ₹29,273.66

   • Total interest paid:₹35,25,678.4

2. Duration 300 months

   • EMI: ₹27,011.71

   • Total interest paid:₹46,03,513

3. Duration 360 months

   • EMI:₹25,679.81​

   • Total interest paid:₹57,44,731.6

Take-away: A higher duration reduces the EMI but increases the total interest paid. Note: Different countries may offer some tax benefits on the interest paid for certain types of loans; the impact of these benefits, if any, is not reflected here. 

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Situation II: Impact of EMI

Assume a loan with a principal of ₹35,00,000 and an interest rate of 8%.

1. EMI ₹25,000:

   • Duration: 408 months

   • Total interest paid:₹67,00,000

2. EMI ₹30,000:

   • Duration: 227 months

   • Total interest paid:₹33,10,000

3. EMI ₹40,000:

   • Duration: 132 months

   • Total interest paid:₹17,80,000

 

Take-away: A higher EMI reduces the duration of the loan and the total interest paid. Note: Different countries may offer some tax benefits on the interest paid for certain types of loans; the impact of these benefits, if any, is not reflected here. 

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Situation III: Impact of the interest rate

The impact of the interest rate is a easier to understand. If the increase rate increases, the amount of interest increases, i.e. more money needs to be repaid. However, the impact becomes harder to understand if the duration also changes along with the interest rate.

 

For this, let us look at 2 fictitious loans each with a principal of ₹35,00,000. Let us assume that the loan 1 has an interest rate of 7% a duration of 300 months and loan 2 has an interest rate of 8% and a duration of 240 months.

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Interest paid on loan 1: ₹39,21,181.57

Interest paid on loan 2: ₹35,26,096.58

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Take-away: A higher interest rate is not always more expensive. To understand the final impact, a look at the duration as well as any tax related benefits is required.

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What should I understand from the examples in the three situations described above?

Some of the main take-aways are:

1. Changing one or more inputs can have an impact on the overall cost for a person

2. Tax benefits, if any, can have an impact on the cost of the loan

3. A lower interest rate does not always minimise the total interest paid on a loan

4. Paying off a loan faster reduces the total interest paid but other dimensions such as individual policy clauses, the ability to service a higher EMI, tax implications etc may play a role

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Are there other ways to save money on a loan?

Yes, there are other ways to save money on a loan. One of them is to increase the EMI or pay lumpsums whenever possible (if the loan contract allows it) especially at the beginning of a loan. You can use this calculator to estimate how one or more extra monthly payments can help save money. 

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You can also save money on a loan by refinancing etc. These methods are currently not supported or described in further detail on this page.

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Why is this calculator useful?

This required investment calculator is useful as it can help a person understand how a loan schedule is structured. This understanding can help in understanding the impact of different types of loan and possibly in making better loan.   

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How do I use this calculator?

Instructions to use this calculator are provided above.