Loan Calculator — Calculate EMI, Affordability, Tenure & Interest Rate (2024)

FAQs

How to calculate tenure from EMI and interest rate? ›

Tenure= (log(e) - log(e - (p * i))) / log(1 + i) I will explain the terms below. E= Monthly EMI P= Remaining Principal I= monthly interest rate/1200 that is 8.9/1200 For example: EMI is Rs.

The 28/36 rule is an easy mortgage affordability rule of thumb. According to the rule, you should spend no more than 28% of your pre-tax income on your mortgage payment and no more than 36% toward total debt obligations. Your mortgage, car payment, credit cards and student loans all count as debt.

Your tenure rate can be calculated by months, years, or other time periods. The sum of months worked by all current employees divided by the number of employees you have today equals the tenure of “stayers”.

The formula to calculate EMI is P x R x (1+R)^N / [(1+R)^N-1] – where, “P” is the principal loan amount, “N” in tenure in months, and “R” is the prevailing interest rate.

The EMI amount is calculated by adding the total principal of the loan and the total interest on the principal together, then dividing the sum by the number of EMI payments, which is the number of months during the loan term.

The formula is: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1], where M is the monthly payment, P is the loan amount, i is the interest rate (divided by 12) and n is the number of monthly payments.

To calculate affordability, lenders typically use an “income multiple” approach or an “affordability assessment.” The income multiple approach involves multiplying your gross annual income by a certain factor (usually between 3 and 5 times your income) to determine the maximum mortgage amount you can borrow.

How do banks calculate affordability? ›

Mortgage affordability is based around your monthly net income and outgoings, the current rate of interest being charged by the lender and a notional rate of interest which is supposed to reflect what might happen if mortgage rates increased over a fixed period.

The 28/36 Rule is a commonly accepted guideline used in the U.S. and Canada to determine each household's risk for conventional loans. It states that a household should spend no more than 28% of its gross monthly income on the front-end debt and no more than 36% of its gross monthly income on the back-end debt.

EMI Calculation Methods

Calculating EMI has a Simple Formula, Which is as Follows: EMI = (P X R/12) X [(1+R/12) ^N] / [(1+R/12) ^N-1]. Here, P is the original loan amount or principal, R is the rate of interest that is applicable per annum and N is the number of monthly installments/ loan tenure.

This metric measures the average length of time individuals are employed by the organization. To calculate tenure, subtract an employee's (employment) start date from the current date or termination date when employee has departed and calculate the average for all employees.

EMIs are higher with a shorter tenure, but you'll pay less interest and pay off the loan faster. On the other hand, if you choose a longer tenure, the EMIs will be more affordable, but the interest payment will increase.

The calculation of the Macaulay duration of a loan with a single initial draw down is: Duration = sum[present value of each debt service * (days since loan draw)/360] / initial loan draw The present value is calculated at the loan interest rate.