How is EMI calculated?
EMI is calculated by dividing the total loan amount by the present value annuity factor. It can be calculated manually or can be derived from the annuity table directly.
EMI for the above loan of Rs 50 lakhs with a 5-year timeframe and 12% p.a. rate of interest can be calculated as follows:
Total loan amount: 50 lakhs
Total number of monthly installments (t): 5*12 = 60
Rate of interest (I): 12%/12= 1
EMI = Loan PVIFA (1%, 60)
= 5000000/44.9550 = Rs 111222.33
It means to say that they shall have to pay Rs 111222.33 every month end of over 5 years to repay their entire loan obligation of Rs 50 lakhs. Learn More