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Interest Formula:
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The interest calculation formula \( I = EMI \times N - P \) calculates the total interest paid over the entire loan tenure, where EMI is the fixed monthly payment, N is the number of monthly payments, and P is the principal loan amount.
The calculator uses the interest formula:
Where:
Explanation: This formula calculates the difference between the total amount paid over the loan term and the original principal, which represents the total interest cost of the loan.
Details: Understanding the total interest paid helps borrowers compare loan offers, make informed financial decisions, and plan their finances more effectively by understanding the true cost of borrowing.
Tips: Enter the EMI amount in your local currency, the total number of monthly payments, and the principal loan amount. All values must be positive numbers.
Q1: Why calculate total interest separately?
A: Knowing the total interest helps you understand the true cost of your loan beyond just the monthly payments.
Q2: Does this calculation include other fees?
A: No, this calculation only considers the principal and interest components of your EMI. Other fees like processing charges or insurance are not included.
Q3: How can I reduce my total interest payment?
A: You can reduce total interest by making prepayments, choosing a shorter loan tenure, or negotiating a lower interest rate.
Q4: Is this calculation accurate for all loan types?
A: This formula works best for fixed-rate loans with consistent EMI payments throughout the tenure.
Q5: What if my EMI changes during the loan term?
A: For variable rate loans or those with changing EMI, you would need to calculate interest for each period separately and sum them up.