How to Calculate Your Personal Loan EMI Using Excel (Step-by-Step Guide)

Equated Monthly Instalments (EMIs) are regular fixed payments to a lender while repaying a loan. The EMI amount is based on some parameters like the total loan amount, the loan period and interest rate.  You can calculate your EMIs using Excel, which allows you to know your EMI amounts in no time. Let us see how Excel can help you figure out your monthly EMI using simple financial formulas.

What is a Personal Loan EMI?

A personal loan EMI is the fixed monthly payment that you pay to the lender for the repayment of your loan. It is the sum of the principal amount and the interest. Being aware of your EMI beforehand helps you check if the EMI is within your budget and also enables you to manage your finances in a better way.

The Formula to Calculate EMI Using Excel

Calculating EMI in Excel is simple with the PMT function. Here is the formula for EMI calculation:

Formula:

Where:

P = Loan Amount (Principal)

R = Monthly Interest Rate (Annual interest rate ÷ 12)

N = Number of Monthly Installments (Loan tenure in months)

Alternatively, you can use Excel's built-in PMT function:

=PMT(RATE,NPER,PV,FV,TYPE)=PMT(RATE, NPER, PV, FV, TYPE)=PMT(RATE,NPER,PV,FV,TYPE)

Where:

RATE = Monthly interest rate

NPER = Number of monthly payments

PV = Present Value (loan amount)

FV = Future Value (usually 0 for loans)

TYPE = Payment type (0 for end of the month, 1 for beginning)

How to Calculate Personal Loan EMI Using the Excel

EMI calculator in Excel is an effective way to know your EMI. You only need to enter the above-mentioned PMT function in a cell of a blank Excel sheet. If you do not have access to Excel, you can also use an online Personal Loan EMI calculator for the same purpose. The advantage of using an Excel EMI formula is that it allows you to customize the inputs and calculate for various scenarios. However, its limitations include not considering other fees, taxes, and interest rate changes.

Now, let us see how EMI calculation is done in Excel through an example.

Suppose you are taking a personal loan of INR 3,00,000 that you intend to pay back in 3 years.  The loan carries an interest rate of upto 25% per annum. First, you need to convert the annual interest rate into a monthly rate by dividing it by 12. The monthly rate of interest will then be 2.08%. The NPER represents the total EMIs you will pay in 3 years which will be 12 X 3 = 36. By using the EMI formula in Excel, as per the example the results will be displayed as -

Thus, the amount of your EMI will be INR 10,966 in this case. The FV will be taken as 0 in the formula, and ‘type’ will be taken as 1, as you usually pay the EMI at the beginning of the month. If the EMI is paid at the end of the month, you should use 0 instead of 1. The monthly EMI will differ in this case.

Also read: All You Want To Know About Your EMIs

Points to Note About EMI Calculation

• The Excel formula takes a monthly interest rate as input, but your lending institution may provide you with an annual interest rate. Make sure you convert the annual rate to monthly by dividing it by 12.
• As interest rates keep changing from time to time, keep your Excel sheet formula updated by entering the latest interest rate.
• Keep aside some funds for emergency use and to cover your basic expenses when deciding the EMI amount you would be able to pay.
• Double-check all the values you enter in the Excel formula. Otherwise, your EMI might come out as incorrect due to human error and your budget planning will be disturbed.

Advantages of Using Excel for EMI Calculation

Customisable: You can easily change the loan amounts, interest rates, and tenures to compare different loan scenarios.

Offline Access: Excel is an offline program and hence it works even if you don’t have internet. Thus, it is an ideal tool for offline use as against online calculators.

Visual Representation: With the help of graphs and charts, you can get a direct picture of the EMI payments breakdown over time.

Flexible: You can modify your spreadsheet to include more elements such as fees or some other loan-related calculations.

Factors that Affect the EMI Amount

5 Factors Influence Your EMI Amount listed below:

• Loan Principal: The higher the principal amount, the larger the EMI.
• Interest Rate: Lower interest rates result in smaller EMIs.
• Loan Term: Longer terms lead to smaller EMIs but higher overall interest payments.
• Frequency of Payments: Monthly payments are standard, but more frequent payments can reduce EMIs.
• Prepayments: Paying off a part of the principal reduces EMIs and overall interest.

Understanding these factors empowers borrowers to make informed decisions about their loans. By considering these elements, you can better manage your finances and choose the EMI amount that aligns with your budget and financial goals.

Also Read:  What Does Emi Mean?

Facts You Should Know About Loan EMI Calculation

There are some facts that you should know about loan EMI calculation:

• Formula Basics: Loan EMI calculation involves the formula EMI = [P x R x (1+R)^N] / [(1+R)^N-1].
• Principal Amount (P): The initial loan amount you borrow from the lender.
• Interest Rate (R): The rate at which interest is charged on the loan amount.
• Loan Tenure (N): The total number of monthly installments for loan repayment.
• Monthly Installment: EMI comprises both principal repayment and interest payment.
• Decreasing EMI: Often seen in home loans, where EMI reduces gradually over time.
• EMI Calculators: Online tools to simplify accurate EMI calculations.
• Prepayment Impact: Prepayment affects EMI calculation and total interest paid.
• Amortization Schedule: Detailed breakdown of EMI components over the loan tenure.
• Impact of Interest Rate Changes: Fluctuations affect EMI amounts.

Steps to Apply for a Personal Loan after Calculating Your Loan EMI

Follow these steps to apply for a Personal Loan for travel at Hero FinCorp:

• Visit the Hero FinCorp website or install the personal loan app
• Go to the personal loan page and click ‘apply now’
• Enter your mobile number and verify with the OTP received
• Choose the loan amount you need
• Verify your KYC details to check income eligibility
• Click ‘Submit’ to complete your application

Read Also: Pre-EMI and Full-EMI - Understanding the Difference

Conclusion

It is quite easy to calculate your EMI obligations using Excel once you know the right formula. However, you may also use online tools such as EMI calculators that are provided on most lending institutions’ websites. In these, you only need to fill in the required details, such as loan amount, interest rate, and loan tenure, to know your exact EMI amount instantly. Online tools are less prone to human errors and will provide you with the most up-to-date information regarding your loan. So, check with your lending institution if they have an online EMI calculator for calculating your monthly EMI.

Frequently Asked Questions

1. How can I create an EMI calculator in Excel?

To create an EMI calculator in Excel, you need to use the PMT function ( the financial functions) and input the loan details. You can then customize the spreadsheet to suit your needs and preferences.

2. What are the advantages of using an EMI calculator Excel?

Using a loan EMI calculator Excel offers several advantages, including quick and accurate calculations, the ability to compare different loan options, and the flexibility to adjust variables.

3. Are there any limitations to using an EMI calculator Excel?

Limitations of using an EMI calculator in Excel include the need to manually update the variables, and the possibility of human error when entering them.

4. Can I customize an EMI calculator Excel sheet to suit my needs?

Yes, you can customize an EMI calculator Excel sheet to suit your needs. You can modify the layout, add or remove variables, and even include graphs and charts to visualize the data.

5.How can I ensure the accuracy of EMI calculations using Excel?

One way is to double-check loan details, apply Excel's PMT function, and compare the result with online EMI calculators to get trustworthy and accurate EMIs.

6.How do I use the EMI formula in Excel to calculate my loan repayment?

Use the PMT formula in Excel: =PMT(rate, nper, -pv) to calculate your monthly loan EMI accurately.

7.What is the best way to calculate EMI in Excel for personal loans?

Calculate EMIs of personal loans by =PMT function with the exact monthly rate, loan tenure in months, and loan amount as inputs.

8.How do I convert the annual interest rate to the monthly rate for EMI calculation in Excel?

You can just divide the annual interest rate by 12. As an example, 12% annually means it is 1% for the month or 12%/12 = 1% in Excel.

9.Is there an easy way to calculate EMI in Excel without using advanced functions?

Yes, use the basic PMT formula. It’s simple, built-in, and doesn’t require advanced Excel skills or complex financial functions.

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