How the loan calculator works
This calculator uses the standard amortizing-loan formula to work out a fixed monthly payment (sometimes called an EMI, for Equated Monthly Installment). Each payment covers the interest that has accrued that month, and whatever is left over reduces the outstanding balance. Early on, most of your payment goes to interest; as the balance falls, more of each payment goes to principal.
The formula
The monthly payment is P ร r ร (1 + r)^n / ((1 + r)^n โ 1), where P is the amount borrowed, r is the monthly interest rate (annual rate รท 12), and n is the number of monthly payments.
Tips for comparing loans
A lower monthly payment often just means a longer term โ and paying far more interest overall. Look at the total interest figure, not only the monthly amount. Even a small difference in the interest rate can add up to a large sum over the life of the loan, so it pays to shop around.