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Equated Monthly Installment - Emi

Those who have applied for bank loan might have heard the Term EMI (Equated Monthly Installments). An EMI is the amount a person paying to the bank in each month as equally against his loan. Here is a step by step guidance on hot to calculate your EMI and methods to prevent possible lose from paying more amount than original loan.

I have given 2 scenarios and practices to help you to calculate the applicable EMI amount using Microsoft Excel. Before starting, confirm, you have all required information to calculating EMI. The total loan amount, Percentage of interest (in diminishing rate), and loan duration (in months).

What is EMI and how to calculate Equated Monthly Installment

First, we will identify the possible EMI and cost associated with a short term loan.

Scenario 1 - Suppose, I am taking a short term loan of $100,000 in an interest of 8% indiminishing rate and the repayment duration for this loan is 36 month.

To calculate the monthly installment, follow the below steps with MS Excel.

1. Open MS Excel > Select ‘Insert’ menu > Select ‘Function” sub menu

2. In the opening box, choose ‘PMT’ from the list of ‘Select a function’ box and click ‘OK’

3. In the next box, provide the details: Rate = 0.08/12, Nper = 36, Pv = 100000, fv = 0, Type = 0


('Rate' is the 8% interest rate, 'Nper' is the 
loan duration in months, 'Pv' is the loan amount . There is no fair value so we are giving ‘zero’ for ‘fv’. We are again giving ‘zero’ for ‘type’ which indicating that the EMI will pay in each month without failure.)

4. You can now click OK button to get the EMI amount of $3,133.64, 
which you required to pay in each month to bank for next 36 months against your $1 lakh loan with 8% interest rate.

Now, multiply the received $3,133.64 with 36 months. (3133.64 x 36 months), you will get a total of $112,811.04. This is the amount you finally paying back to your bank at the end of 36 months against your $1 lakh loan. It shows that, you are paying an excess amount of $12,811.04 as the cost of this loan.

In our second scenario, we will calculate the EMI for a long term loan and identify the excess amount one required to pay.

Scenario 2 – Suppose, I am taking a home loan of $ 25 lakhs with an interest of 12.5% indiminishing rate and the repayment duration is 400 months.

1. Open MS Excel > Select ‘Insert’ menu > Select “Function” sub menu

2. In the opening box, choose ‘PMT’ from the list of ‘Select a function’ box and click ‘OK’

3. In the next box, provide the details: Rate = 0.125/12, Nper = 400, Pv = 2500000, Fv = 0, Type = 0

('Rate' is the 12% interest rate, 
'Nper' is the loan duration in months, 'Pv' is the loan amount . There is no fair value so we are giving ‘zero’ for ‘fv’. We are again giving ‘zero’ for ‘type’which indicating that the EMI will pay in each month without failure.)

4. 
You can now click OK button to get the EMI amount of $26,460.85/-, which you required to pay in each month to the bank for next 400 months against your $25 lakh loan with 12.5% interest rate.

This is not an end. I am really coming to the point of revealing the treacherous secret each and every bank using to cheat poor loan holders and get huge profits. Now you have and EMI of $26,460.85 in your hand. Multiply this EMI amount with total month of 400 (EMI $26460.85 x 400 months). The result will be $10,584,339.72/-. This mean, you are paying an amount of $105 lakhs against the $25 lakhs loan !!!! Man, it is five times to the original loan amount.

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