1. What is the Interest Calculation Formula?

The formula I = EMI × N - P calculates the total interest paid over the entire loan tenure in Indian loans. This helps borrowers understand the true cost of borrowing beyond just the principal amount.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( I \) — Total interest paid (INR)
• \( EMI \) — Equated Monthly Installment (INR)
• \( N \) — Number of monthly payments
• \( P \) — Principal loan amount (INR)

Explanation: This formula calculates the difference between the total amount paid over the loan term and the original principal, which represents the interest cost.

3. Importance of Interest Calculation

Details: Understanding total interest paid helps borrowers make informed decisions about loan products, compare different loan offers, and plan their finances effectively throughout the loan tenure.

4. Using the Calculator

Tips: Enter the EMI amount in INR, the total number of monthly payments, and the principal loan amount in INR. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why calculate total interest separately?
A: It helps borrowers understand the true cost of credit and compare different loan options more effectively.

Q2: Does this calculation include all loan charges?
A: This calculation only includes the interest component. Other charges like processing fees, insurance, or prepayment penalties are not included.

Q3: How does loan tenure affect total interest?
A: Longer tenures typically result in higher total interest paid, even if EMIs are lower, due to the extended interest accumulation period.

Q4: Can this formula be used for any type of loan?
A: Yes, this formula works for home loans, car loans, personal loans, and other installment loans in the Indian context.

Q5: How accurate is this calculation?
A: This provides an exact calculation of total interest based on the inputs, assuming the EMI remains constant throughout the loan term.