1. What is the Interest Calculation Formula?

The interest calculation formula \( I = EMI \times N - P \) calculates the total interest paid over the entire loan tenure. It provides a simple way to understand the total cost of borrowing beyond the principal amount.

2. How Does the Calculator Work?

The calculator uses the interest formula:

Where:

• \( EMI \) — Equated Monthly Installment (monthly payment amount)
• \( N \) — Total number of monthly payments
• \( P \) — Principal loan amount
• \( I \) — Total interest paid over loan tenure

Explanation: The formula multiplies the monthly payment by the total number of payments to get the total amount repaid, then subtracts the principal to determine the interest portion.

3. Importance of Interest Calculation

Details: Understanding total interest cost helps borrowers make informed financial decisions, compare loan options, and plan their finances effectively throughout the loan period.

4. Using the Calculator

Tips: Enter the monthly EMI amount, total number of monthly payments, and principal amount. All values must be positive numbers for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: Why calculate total interest separately?
A: Knowing the total interest helps borrowers understand the true cost of borrowing and compare different loan offers effectively.

Q2: Does this formula work for all types of loans?
A: This formula works for fixed-rate loans with consistent EMI payments throughout the tenure.

Q3: What if I make extra payments or prepay?
A: This formula calculates interest for the original payment schedule. Extra payments would reduce total interest, requiring a different calculation.

Q4: How does loan tenure affect total interest?
A: Longer loan tenures typically result in higher total interest payments, even if monthly payments are lower.

Q5: Can this formula be used for other periodic payments?
A: Yes, the formula can be adapted for quarterly, semi-annual, or annual payment schedules with appropriate adjustments.