How to calculate interest on a personal loan? Here's a guide to help you understand

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Principal: The amount of money borrowedRate: The loan’s annual interest rateTime: The loan’s termUse a financial calculator or an online loan calculator as it is more difficult to calculate by yourself A personal loan EMI calculator is a useful online tool that helps you estimate the equated monthly installment (EMI) payment for a personal loan. It takes into account three key factors:Loan amount: The total amount of money you borrow from the lender.Interest rate: The APR imposed by the lender, which includes both the base interest rate and any additional costs.Loan tenure: The total number of months or years for which you borrow money.When you enter these facts into the calculator, it runs a sophisticated mathematical computation to compute your EMI.

This method takes into account amortised interest, which means it accounts for the loan’s declining balance over time.ALSO READ: 7 crucial steps to follow to get a personal loan after bankruptcyThe amortisation schedule in the following illustration explains how one repays amortised interest on a personal loan sought. Assume that you have availed of a personal loan amounting to ₹1,00,000 for 12 months at 10.5% interest.PeriodEMI InterestPrincipalBalance0 ₹100000.001 ₹8814.86 ₹875.00 ₹7939.86 ₹92060.142 ₹8814.86 ₹805.53 ₹8009.33 ₹84050.813 ₹8814.86 ₹735.44 ₹8079.42 ₹75971.394 ₹8814.86 ₹664.75 ₹8150.11 ₹67821.285 ₹8814.86 ₹593.44 ₹8221.42 ₹59599.866 ₹8814.86 ₹521.50 ₹8293.36 ₹51306.497 ₹8814.86 ₹448.93 ₹8365.93 ₹42940.578 ₹8814.86 ₹375.73 ₹8439.13 ₹34501.439 ₹8814.86 ₹301.89 ₹8512.97 ₹25988.4610 ₹8814.86 ₹227.40 ₹8587.46 ₹17401.0011 ₹8814.86 ₹152.26 ₹8662.60 ₹8738.4012 ₹8814.86 ₹76.46 ₹8738.40 ₹.00Source: HDFC Bank Website (As of June 06, 2024)Frequently Asked Questions (FAQs