HOW TO CALCULATE MONTHLY INTEREST ON LOANS

1. Education loan Interest

2. HOW TO CALCULATE MONTHLY INTEREST ON LOANS

3. A loan can simply be defined as a specific amount that a bank lends you on a certain rate of interest and facilitates a monthly repayment schedule for you as per the tenure agreed upon by both parties. • Equate Monthly Instalment or EMI is the monthly sum you have to pay for a fixed number of months to fully repay the loan amount that you have taken. • It is the sum of the principal amount and interest levied on that amount for a particular month.

4. A Loan can be viewed as the Bank investing in a borrower • A good way of understanding what a loan interest is and why is it charged by a Bank is to look at it from an investment perspective. • We frequently invest in fixed deposits to get returns on our investments. • This investment deposit can be viewed as you lending the Bank some money to invest in other assets and you in turn get profits on your investment at the end of the deposit term. • In a similar way, giving loans is the Bank’s way of investing in you. It lends you the money which you invest in buying a car, home, education or even a personal venture.

5. Calculation of Monthly Interest • While the rate of interest varies for different types of loans, the calculation of EMI and Interest are largely governed by the principal amount and loan tenure. • A very easy and simple way of calculating the component of monthly loan interest is the use of Microsoft Excel.

6. Open an Excel spreadsheet • Locate the fx or the Insert Function symbol (Just below the Font options under Home tab) • Select “Financial” in the category drop-down list and “IPMT” in the function list • Rate – Rate of Interest adhering to an amortized (blended) loan schedule • In Loan Schedule Amortization, EMI is a blend of principal amount and interest. • In the initial months, a large part of the EMI goes toward paying the interest amount and as the tenor increases, the major part of the EMI transitions towards paying the principal amount.

7. Awareness allows Planning • Knowing how to calculate the interest that you are paying for each instalment along with the total interest allows you to regulate your finances accordingly so that there is never a default on payment. • In case your repayment capacity increases during the loan term, you can get the Education loan Interest tenure restructured and increase the monthly instalment amount to save on the interest. • Source: (http://www.itsallaboutmoney.com/banking-products/loans/how-is-monthly-interest-calculated-on-my-loan/)

8. https://www.facebook.com/AvanseEducationLoan https://www.linkedin.com/company/avanse-financial-services https://twitter.com/avanseeduloan https://plus.google.com/+AvanseFinancialServicesLtdMumbai https://www.youtube.com/channel/UCcsuUx1EH1C08XmX2embpug

9. Read more on Education loan calculator India :http://www.avanse.com/calculators/emi-calculator/ • Thank You..!!!