Question Detail

How to Calculate loan EMI ?

4 months ago Views 187 Visit Post Reply

I want to create a script for the monthly EMI Calculation. Let's say my product value is Rs. 10000, interest rate = 12% and period is 3 months. How to calculate EMI value for this?. I have tried with some formula. But not getting the correct value. Can you tell me any idea about this? Thanks in advance.

<?php 
$AMOUNT=10000; 
$intrest=12; // 12 percentage 
$plan=3; // 3 months 
$EMI=($AMOUNT * (($intrest/100)*($plan))); echo $EMI; 
?>


Thread Reply

Hemant Sharma

- 4 months ago

EMI Calculation Formula Description

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

In this formula the variables stand for:

EMI - Equated Monthly Installment
P - Principal / The amount that is borrowed as a loan
R - Rate of interest that is levied on the loan amount (the interest rate should be a monthly rate)
N - Tenure of repayment of the loan or the number of monthly installments that you will pay (tenure should be in months)

This is the same formula an EMI calculator uses to provide you with the correct EMI payable within seconds.

 

Let us consider an example to understand EMI calculations in a better way,

For instance, you have taken a personal loan of Rs. 2 lakhs for 2 years at an interest of 20 % p.a.

Firstly, we need to convert the annual interest rate into a monthly rate and the tenure into months.

To calculate the monthly interest rate, we divide the annual interest rate by the number of months in a year, i.e. 12, so monthly 20/12 = 1.66% per month

The 2-year loan tenure must also be converted into months before integrating into the formula i.e. 24 months

 

Now we have the three variables with us which we can integrate into the formula as follows:

 

EMI Formula

 

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

P = 10,000

R = 12%

N = 3 Months

Hemant Sharma

- 4 months ago

EMI Calculation Formula Description

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

In this formula the variables stand for:

EMI - Equated Monthly Installment
P - Principal / The amount that is borrowed as a loan
R - Rate of interest that is levied on the loan amount (the interest rate should be a monthly rate)
N - Tenure of repayment of the loan or the number of monthly installments that you will pay (tenure should be in months)

This is the same formula an EMI calculator uses to provide you with the correct EMI payable within seconds.

 

Let us consider an example to understand EMI calculations in a better way,

For instance, you have taken a personal loan of Rs. 2 lakhs for 2 years at an interest of 20 % p.a.

Firstly, we need to convert the annual interest rate into a monthly rate and the tenure into months.

To calculate the monthly interest rate, we divide the annual interest rate by the number of months in a year, i.e. 12, so monthly 20/12 = 1.66% per month

The 2-year loan tenure must also be converted into months before integrating into the formula i.e. 24 months

 

Now we have the three variables with us which we can integrate into the formula as follows:

 

EMI Formula

 

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

P = 10,000

R = 12%

N = 3 Months