How to Calculate EMIs

If you own a house or car, chances are you're paying EMI. Equated monthly installment (EMI) is the total amount to be repaid on a loan (including interest) divided by the number of periods you're paying the loan. The components are not static--that is, the interest component of EMI is higher in the beginning of the loan and then declines over the life of the loan. For this reason, it is important to be able to verify the loan documents and schedule of payments issued by your lender.

Instructions

1

Open a new of Excel file in Microsoft Word.

2

Go to "Functions." This can be found in the drop-down menu or as a button. If you don't see it, do a search in the "Help" menu.

3

Go to "Financials." Select the PMT function.

4

Input the data in the fields provided. If your interest rate is 10 percent, then enter .10 for the interest rate. If you need to make it a monthly interest rate, then divide by 12. Nper refers to the number of periods, which is usually anywhere from 2 to 48 months on a car loan or up to 30 years for a mortgage. For FV, use 0 or the future value of your loan once paid off. For PV, enter the loan amount. For Type, use 1 if your loan starts immediately (not usual), or 0 if it starts after one month.

5

Hit enter to calculate the payment (PMT). This is your EMI or your installment payment. If there's a significant variance from the payment schedule sent by your lender, check to make sure the interest is input correctly. Also, check to see if your interest coincides with the number of periods. That is, for 36 periods at 5 percent interest, the interest would be equal to (5/100)/36 and the number of periods would be 36.

6

Verify your results with an EMI calculator. See Resources for an example.