Demystifying Amortization.
Understanding the true cost of borrowing money is crucial for financial health. This calculator uses the standard Equated Monthly Installment (EMI) formula used by banks and lending institutions globally to calculate exact repayment schedules.
How is Interest Calculated?
Most standard loans use compound interest calculated monthly. At the beginning of your loan, a massive portion of your monthly payment goes toward paying off the interest, with very little going toward the actual principal. Over time, this ratio flips.
The Impact of Time
Extending the term of a loan (e.g., choosing a 6-year car loan instead of a 3-year loan) will dramatically lower your monthly payment. However, as the calculator shows, it significantly increases the Total Interest you will pay over the life of the loan.