Amortization Calculator With Compound Interest

EMI Formula:

\[ EMI = \frac{P \times r \times (1+r)^n}{(1+r)^n - 1} \]

Principal Loan Amount (P):

₹

Annual Interest Rate:

Loan Term:

Monthly EMI:

Total Payment:

Total Interest:

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1. What is an Amortization Calculator?

An amortization calculator helps you understand how your loan payments are structured over time. It breaks down each payment into principal and interest components, showing how your loan balance decreases with each payment.

2. How Does the Calculator Work?

The calculator uses the EMI formula:

\[ EMI = \frac{P \times r \times (1+r)^n}{(1+r)^n - 1} \]

Where:

\( P \) — Principal loan amount (₹)
\( r \) — Monthly interest rate (annual rate ÷ 12 ÷ 100)
\( n \) — Loan term in months
\( EMI \) — Equated Monthly Installment (₹)

Explanation: The formula calculates the fixed monthly payment required to pay off a loan over its term, accounting for compound interest.

3. Importance of Amortization Calculation

Details: Understanding your amortization schedule helps you make informed financial decisions, plan your budget, and see how extra payments can reduce your loan term and total interest paid.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate, and loan term. You can choose between years or months for the term. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.

Q2: How can I reduce my total interest payment?
A: Making extra payments toward principal, choosing a shorter loan term, or refinancing at a lower interest rate can reduce total interest.

Q3: What happens if I make partial prepayments?
A: Partial prepayments reduce your principal balance, which decreases future interest payments and may shorten your loan term.

Q4: Are there any hidden costs in EMI calculations?
A: This calculator shows only principal and interest. Real loans may include processing fees, insurance, or other charges not reflected here.

Q5: Can I use this for different types of loans?
A: Yes, this calculator works for home loans, car loans, personal loans, and any other loan with fixed monthly payments and compound interest.