How to Calculate Your Loan Repayment Without a Calculator
Most people today use online loan calculators to find their EMI (Equated Monthly Instalment). But what if you don’t have internet access or want to double-check the result manually?
Knowing how to calculate loan repayments yourself can help you verify numbers, spot mistakes, and understand the math behind your loan.
This guide will walk you through step-by-step manual EMI calculation with examples.
1. The EMI Formula
The standard EMI formula is: EMI=P×R×(1+R)N(1+R)N−1EMI = \frac{P \times R \times (1+R)^N}{(1+R)^N – 1}EMI=(1+R)N−1P×R×(1+R)N
Where:
- P = Principal loan amount (total borrowed)
- R = Monthly interest rate = (Annual Interest Rate ÷ 12 ÷ 100)
- N = Total number of months in the loan term
2. Step-by-Step Example
Loan Details:
- Principal (P) = $100,000
- Annual Interest Rate = 10%
- Tenure = 5 years (60 months)
Step 1: Convert Interest Rate to Monthly
Annual rate = 10%
Monthly rate (R) = 10 ÷ 12 ÷ 100 = 0.008333
Step 2: Calculate (1+R)^N
(1 + 0.008333) = 1.008333
Raise to the power of 60 months:
1.008333^60 ≈ 1.647
Step 3: Apply the Formula
EMI = [100,000 × 0.008333 × 1.647] ÷ [1.647 – 1]
EMI = [1,372.5] ÷ [0.647]
EMI ≈ $2,120.74 per month
3. Breaking Down the EMI
Your monthly payment ($2,120.74) includes:
- Interest portion (starts high, decreases over time)
- Principal portion (starts low, increases over time)
By the end of the loan, the total amount paid will be:
EMI × months = $2,120.74 × 60 ≈ $127,244.40
Total Interest = $27,244.40
4. Why Manual Calculation Matters
- Double-check calculators — mistakes happen if data is entered wrong
- Better negotiation — you understand exactly how numbers work
- Offline use — useful if you don’t have internet access
- Budgeting clarity — you can estimate repayments in different scenarios
5. Shortcut Method for Quick Estimates
If you just need a rough estimate, use this rule:
For every 1% interest per month, you’ll pay roughly $10 per $1,000 borrowed for a 12-month term.
Example:
Borrow $10,000 at 1% per month → Approx. $100/month (interest only).
Add principal portion based on tenure for a rough EMI idea.
6. Common Mistakes to Avoid
- Forgetting to convert annual rate to monthly
- Using months instead of years in formula (or vice versa)
- Rounding numbers too early (wait until the final step)
- Ignoring extra charges like processing fees
7. Final Thoughts
While online calculators are convenient, understanding the formula puts you in control. It’s like knowing the recipe instead of just eating the cake — you can tweak, check, and adjust it to suit your needs.
