How the Loan Calculator Works
Our loan calculator supports two common repayment methods:
1. Reducing Balance (Amortizing Loan / EMI)
This is the standard method used for mortgages, car loans, and most personal loans. Your monthly payment stays the same, but the portion going to principal increases over time while the interest portion decreases. The formula used is the standard amortization formula:
M = P × r × (1+r)ⁿ / [(1+r)ⁿ - 1]
2. Flat Rate (Simple Interest)
Interest is calculated on the original principal for the entire loan term. Total interest = Principal × Rate × Years. This method results in higher total interest but equal principal and interest payments each month.
Important: Enter your own interest rate based on your lender or country's current market rates. Default values are examples only.